In an effort to reduce the budget deficit, the Czech Republic’s finance minister, Zbynek Stanjura, intends to revamp the value-added tax system by boosting the VAT on some goods, such as hotels, water, beer, and heating.
The current two lower VAT rates of 10% and 15% would be consolidated into a single rate of 14% under the budget-cutting measures, which Czech Television described as the biggest in eight years, but the maximum level of 21% would be maintained.
Services like lodging, water, sport and cultural activities that are currently taxed at lower rates would move into the 21% bracket under the changes, which still need to face debate in the five-party, centre-right coalition government.
Stanjura told Czech TV in a Monday evening report that items would be judged on whether “there is a societal reason to consume more of these services.”
“All others are up for debate,” he said.
The ministry did not reply immediately to a request for comment.
The government took power at the end of 2021 with plans to rein in growing debt and deficits.
But it has faced higher spending needs due to Russia’s invasion of Ukraine and state aid necessary to ease the impact of soaring energy costs on households and firms.
The state is looking for around 70 billion crowns from budget savings or indirect tax increases to lower next year’s deficit from a planned 295 billion crown gap this year, aiming to help quell inflation running above 16%.
While the central state budget gap should fall this year under government plans, the overall fiscal gap is expected to rise to 4.2% of gross domestic product, remaining outside European Union limits, according to ministry forecasts.