Shoppers will soon need to dig deeper

Shoppers will be hit with higher prices as of Thursday, when the next round of hikes to value-added tax are to take effect. Higher VAT, introduced as part of austerity measures needed to secure 110 billion euros of funding from the European Commission and the International Monetary Fund, will bite into household and business budgets at a time when consumption is falling. The 21 percent VAT rate will increase to 23 percent as the government scrambles to boost ordinary budget revenues in 2010 by an annual pace of 11.7 percent despite the recession. Data for the first five months of the year show that revenue growth fell short of the target, increasing just 8.5 percent. The 10 percent rate applicable on goods and services such as food, nonalcoholic beverages and restaurants will be hiked up to 11 percent. The 5 percent rate for newspapers and magazines will increase to 5.5 percent. VAT rates were last raised in April.