Lowered VAT Rate Transfer to the Consumer Prices: Selected Medicaments Case Study
Lowered VAT Rate Transfer to the Consumer Prices: Selected Medicaments Case Study

Author(s): Gabriela Kukalová, Lukáš Moravec, Dana Bína Filipová, Viktor Janáček, Miroslav Ulrych
Subject(s): Economic policy, Fiscal Politics / Budgeting, Socio-Economic Research
Published by: Masarykova univerzita nakladatelství
Keywords: VAT; tax rate; tax burden; price; Czech Republic;
Summary/Abstract: The contribution focuses on changes in the tax burden on consumers following the introduction of a second reduced rate of value added tax on selected products. The shift in tax burden was assessed on a sample of specific pharmacy products that had been included in the second reduced VAT rate since 1st January 2015. Based on the pharmacy chain recommendations that provided the necessary data, the products were selected as a typical assortment sample, including contraception, high blood pressure medication, vaccine, antibiotics, and baby food. The provided data included mainly sales prices for final consumer for selected products in the months of 2014 and 2015. Data on sales prices were adjusted for inflation. The results show that the impact of the inclusion of selected products in the second reduced VAT rate on the final consumer price was positive. Reducing the VAT rate by including the price change set by the vendor and including inflation reduced the tax burden on the final consumer for all the products examined. The amount of change was highly variable in the individual products, thanks to the entry of other non-tax factors into the price formation process.

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