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VAT cut proves ineffective

Last time updated
27.06.23
VAT cut proves ineffective

From 1st January 2023, three VAT rates were reduced by 1%: the standard rate, the intermediate rate and the reduced rate. They will then be 17%, 13% and 7% respectively. The minimum VAT rate of 3% was not affected by the changes.

It turns out that only 50% of goods and services were covered by these measures. This is because the minimum rate applies in areas such as food and municipal payments. In addition, rents are not subject to the VAT rate. As a result, inflation fell by 0.18%. 0.07% of this was due to the VAT rate.

The smallest effect was seen in the beauty and restaurant sectors: Beauty salons, hairdressers and restaurants hardly lowered their prices. It is a completely different story in supermarkets. They overtook the car industry and speciality shops, with almost 60% of all food items falling in price.

In the end, the reduction in the VAT rate has certainly helped to curb inflation, but not as much as the government had hoped. The measure will remain in force until the end of the year, after which the rates will be brought back to their normal level.

Last time updated
27.06.23

Source: Paperjam

We took photos from these sources: Euros, money, banknotes, currency notes

Authors: Kadriia

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