2012 VAT Increase

V.A.T. (Value Added Tax) is what Americans would call sales tax. There are two different rates. Everyone used to pay 20% but there was a reduced rate of 10% on food, medicines, newspapers, books, heating, water and public transportation. Well, that was until the start of 2012. Now, everything costs more!

In order to reduce the debt, and given the current Eurozone crisis, the Czech government has made changes to the VAT. The goal is to have a standard flat rate of 17.5%. So this year, the reduced 10% rate increases to 14% and the 20% rate remains the same.

Then in 2013, the 14% rate will increase to 17.5% and the 20% rate will drop to 17.5% so that everything will be taxed the same. At least, that's the plan for now. Somehow I have a feeling that by 2013, everything will be taxed at 20%. Of course, I hope that I'm wrong.

So the bottom line is that now people are paying more taxes. The cost of groceries is now 4% higher than what it was a few weeks ago. And I just renewed my public transit pass and it cost me more this year than before. I wonder what kind of effect this will have on pensioners? I'm sure that they will really feel the pinch because it's not like their benefits have increased.

Note:  VAT increased in 2013 too.

Update: In 2021 the VAT is 21%.