Updating calculations on the application of a reduced VAT rate in the fruit and vegetable sector, as well as determining the impact of the reduced VAT rate on sales volume, price levels, and its impact on the state budget

Project description

This work is to prepare ex-ante evaluate for the possible reduction of the Value Added Tax (VAT) rate from 21% to 5% for certain food products – some types of fresh fruits, vegetables, berries and potatoes.

Several tasks were performed: estimation of the expected price decrease for the group, evaluation of the possible increase in consumption, evaluation of the possible impact of the VAT rate reduction on the state budget.

For the calculations model from the previous research is used, but with addition of the shadow economy sector.

This research results convinced policy makers to reduce VAT rate for the mentioned goods for the period of 3 year