VAT hike to 20% passed in parliament

As forecast, the government raised the standard VAT rate yesterday from 19% to 20%, starting from 1 January 2011.

The increase is a temporary measure to help the country climb out of its deficit hole, which should see a deficit of around 8% of the GDP this year. The government plans to return VAT to the 19% level once the public deficit falls to below 3%, which it projects to achieve in 2013.

The opposition has been objecting to the move, but it was passed in parliament anyway, thanks to coalition cohesion. MP for strongest opposition party Smer-SD, Peter Kazimir, is claiming that the move will see the average 2-kid family EUR 10 more out of pocket every month and that this would be enough to bosst cross-border shopping in Hungary and Austria.

Parliament also agreed to scrap the 6% tax on yard sales of home produce.

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