Minister to cut VAT rate in bid to mollify restaurateurs over electronic cash registers

The minister of finance, Andrej Babiš, plans to reduce the value added tax charged in Czech restaurants to 15 percent as part of an amendment introducing the compulsory recording of takings in electronic form. He is set to present the bill to the cabinet next month.

Illustrative photo: Mohylek, CC BY-SA 3.0

Restaurateurs and hoteliers have long criticised a situation in which they are forced to buy raw foodstuffs at a 15 percent VAT rate but sell meals at a 21 percent rate. The proposal would see the lower rate apply to both.

The president of the Czech Association of Hotels and Restaurants, Václav Stárek, has welcomed the promised change, pointing out that it would bring to an end an unfair situation in which the VAT rate at fast food outlets is lower than at “sit down” restaurants.

Mr. Babiš outlined the plan at a Czech Chamber of Commerce conference on Tuesday focused on legislation set to come into effect in January 2016 making it compulsory for businesses to supply information on sales online in real time.

Electronic cash register, photo: Hekata 5, Wikimedia CC BY-SA 3.0

Finance Ministry officials say the move will reduce tax evasion, with the extra revenues contributing up to CZK 12 billion a year to the state coffers.

The promised VAT cut is being seen as an attempt to mollify restaurant operators, who have been demanding compensation for costs that will be incurred with the introduction of electronic cash registers hooked up to a tax authority database.

The fiscal devices are principally used in former communist countries and some African states. Mr. Babiš told the conference that when Croatia introduced the fiscal devices some eateries registered a jump in official revenues of up to 900 percent. (The VAT rate was also reduced in the Balkan state).

Vladimír Dlouhý, photo: Filip Jandourek, Czech Radio

However, the introduction of the system in the Czech Republic is likely to be accompanied by birth pangs. The finance minister says the target date of January 1 next year will be difficult to meet and the change may be postponed for some months.

For his part, the president of the Chamber of Commerce, former industry minister Vladimír Dlouhý, said operators are likely to need time to get used to the system. Delaying the implementation by six months wouldn’t be a tragedy, he told Tuesday’s conference.

Mr. Dlouhý – who broadly backs the plan – also said restaurant owners feared a situation in which the new system would be so time-consuming to administer that they would have queues of impatient diners waiting to pay. What’s more, if the system collapsed they would be unable to do business.

The finance minister said it would cost a maximum of CZK 317 million to introduce the system and around CZK 250 million to run it every year.