VAT cut extension till June?
After the measures to support vulnerable households at Christmas, announced last Thursday, amounting to 365 million euros, it is time for decisions on the extension of the reduced value-added tax rate on transport, food service and the tourism package, as the measure is about to expire at the end of the year.
Finance Ministry sources said final decisions will be taken at a meeting on Monday ahead of the tabling of the 2024 budget on Tuesday, but so far the main view is that another extension will eventually be given, possibly for six months.
The government’s motivation is not to burden prices via a return to the normal rate of VAT of 24% from the current reduced 13%, as it is certain that the cost, in such a case, would be passed on to consumers. On the other hand, the dynamics of the budget seem to supply the fiscal margins for such a decision. It is noted that the cost of the reduced VAT rate on the products in question is €250 million for six months.
This comes on top of the support measures given, mainly the reform of the payroll in the public sector (€906 million) and the increase of the tax-free exemption by €1,000 for families with children (€135 million).
