At the stroke of midnight on New Year’s eve the new 20% VAT rate took effect in Slovakia, meaning we will pay slightly more for all goods and services that are subject to the basic VAT rate.
The effect on prices will be minimal, but the VAT hike of the government should bring in around EUR 185.5 million extra to the state coffers in 2011, according to estimates of the Ministry of Finance. The government introduced the step as part of its endeavour to cut the public finance deficit, which reached almost 8% of the GDP last year.
The 20% hike is a temporary measure put in place until the deficit gets to under 3%, which the government expects to achieve in 2013. This year the deficit should drop by around EUR 1.75 billion overall, thanks also to an additional EUR 770 on the side of receipts.