Prague - The Czech government today approved a reduced 10 percent VAT rate on books, baby food and medicines, and the second lower VAT rate is expected to take effect as of January 2015, the cabinet has told CTK.
Předseda vlády Bohuslav Sobotka přichází na zasedání vlády, které se uskutečnilo 28. dubna v Praze. ČTK Krumphanzl Michal
The government pledged to cut the rate in the coalition agreement but nappies were removed from the original proposal as their moving to the lower tax rate bracket might run counter to the EU legislation.
The basic VAT rate of 21 percent and the reduced rate of 15 percent will be maintained under the VAT law. A unified VAT rate of 17.5 percent, which was to be introduced as of January 2016, has been cancelled.
The 10 percent VAT rate will cost the budget Kc2.9bn, with the lower rate on medicines to have the biggest impact on tax collection, according to the Finance Ministry.
A drop in prices for end consumers is a positive effect and the reason for the introduction of the second reduced rate, the ministry said.