THE INFLUENCE OF THE DECREASE OF VALUE ADDED TAX

The aim of this paper is to detect the influence of the decrease of value added tax (VAT) on the basic food products in the Slovak Republic (SR). The analysis was conducted in period 2004-2016 based on available data. Data source was Eurostat and Slovstat (The Statistical office of the Slovak Republic), Ministry of Finance of SR. The influence the decreasing of VAT on basic food products market is in the article quantified by the trade and welfare analysis. We used functions of supply and demand for chosen basic food product. The consumption of basic food products decreased significantly in period 2004-2016. On contrary, the monthly net earnings per habitant in the Slovak Republic had been increasing on yearly basis. The Slovak Republic belongs to the countries with the lowest income in the EU countries. For these reasons the government decided on decreasing the VAT for basic food products (e.g. milk, bread and butter), on the level of 50 percent of the VAT base. The descriptive statistic of VAT charges for food products in EU countries shows, that the average charge is 9.92% with standard deviation 3.68. The most frequent charges are on the level 9 percent and 10 percent. Half of the countries has the charge lower than 9.5 percent. In the SR food products were charged by the basic VAT on the level 20 percent in 2015, which was the highest charge among the EU countries.