The Causes of Changes in the Rates of Value Added Tax in the Czech Republic and their Possible Impacts

Value added tax is the most harmonized tax within the single internal market of the European Communities. Although Community law defines the basic constraints of the VAT legislative form in the Member States, Directive No. 2006/112/EC on the common system of value added tax, as amended, leaves a certain freedom for the Member States. One of the most visible characteristics of VAT is its rates, which are – while maintaining the established minimum limits – fully within the responsibility of Member States. This paper outlines - on the example of the Czech Republic and the VAT changes effective as at 1/1/2010 – the possibility of following the internal fiscal interests of the Czech Republic in the context of the economic crisis and the obligation to implement the directives of the Council. The aim of this text is to indicate, along with the increase of the public budget revenues, the further effects of changes in VAT rates on the consumer basket (and thus the price level) and the structure of household expenditures.