VAT Reduction Intended to Aid Gastronomy Sector Instead Fuels Price Confusion and Tax Concerns
Bratislava,โ Slovakia – A recent reduction in Value Added Tax (VAT) rates for the gastronomy sector in Slovakia has failedโ to translate into โขlower prices for consumers and has โฃinstead created a complex and potentially โexploitable system, according โฃto the Institute of Financial Policy (IFP). Intended to โคstimulate the hospitality industry, the new tiered VAT structure is causing confusion for businesses and raising concerns about increased โคopportunities for tax avoidance in a sector โalready prone toโ revenue shortfalls.
the shift, implemented โขin 2024,โข replaced a single VAT โคrate โwith aโ systemโ requiring restaurants and food service providers to apply up to โคthree different ratesโ to a single โคtransaction, and a separate rate for deliveries. This complexity impacts businessโข owners, consumers, andโ the state’s abilityโ to effectivelyโข collect taxes. The IFP warns the situation โcould โคexacerbate theโข existing “tax gap” โwithin theโข gastronomy sector – theโค difference between taxes owedโ and taxes actually โฃpaid.
under โขthe new rules,food consumed on-site is subject to a 5% VAT rate.โข However, soft drinks are taxed at 19%, and alcoholic beverages carry โthe highest rate of 23%. Furthermore, the same mealโข ordered for delivery isโค subjectโ to a 19% VAT, a discrepancy that promptly increases โขcosts for customers โขchoosing that option.โค
prior to 2024, โคa uniform VAT rate applied across the board. The IFPโ highlights that this simpler system was replaced with a structure that not only increases โฃadministrative burdens โฃfor entrepreneurs โbutโค also createsโ avenues for “tax optimization,” a term often used to describe legal, but potentially aggressive, tax avoidance strategies.โข The institute’s analysis suggestsโ the added complexity couldโ make it more tough for tax authorities to monitor and enforce compliance within the industry.