VAT Reduction Intended to Aid Gastronomy Sector Instead Fuels Price Confusion and Tax Concerns
Bratislava, Slovakia – A recent reduction in Value Added Tax (VAT) rates for the gastronomy sector in Slovakia has failed to translate into lower prices for consumers and has instead created a complex and potentially exploitable system, according to the Institute of Financial Policy (IFP). Intended to stimulate the hospitality industry, the new tiered VAT structure is causing confusion for businesses and raising concerns about increased opportunities for tax avoidance in a sector already prone to revenue shortfalls.
the shift, implemented in 2024, replaced a single VAT rate with a system requiring restaurants and food service providers to apply up to three different rates to a single transaction, and a separate rate for deliveries. This complexity impacts business owners, consumers, and the state’s ability to effectively collect taxes. The IFP warns the situation could exacerbate the existing “tax gap” within the gastronomy sector – the difference between taxes owed and taxes actually paid.
under the new rules,food consumed on-site is subject to a 5% VAT rate. However, soft drinks are taxed at 19%, and alcoholic beverages carry the highest rate of 23%. Furthermore, the same meal ordered for delivery is subject to a 19% VAT, a discrepancy that promptly increases costs for customers choosing that option.
prior to 2024, a uniform VAT rate applied across the board. The IFP highlights that this simpler system was replaced with a structure that not only increases administrative burdens for entrepreneurs but also creates avenues for “tax optimization,” a term often used to describe legal, but potentially aggressive, tax avoidance strategies. The institute’s analysis suggests the added complexity could make it more tough for tax authorities to monitor and enforce compliance within the industry.
