Dec 05, 2023

Food Prices in Czech Supermarkets to Raise Despite Czech VAT Cut

From January 2024, the Czech Republic will witness a reduction in VAT on food products, dropping from the current 15% to 12%.

Back in August, retailers assured the government that this decrease would be transparently reflected in final prices, bringing relief to shoppers.

However, on Monday, December 4th, Tomáš Prouza, President of the Union of Trade and Tourism of the Czech Republic, revealed that there will be no reduction in food prices; instead, they are set to rise significantly in the new year.

Prouza clarified, “We find ourselves compelled to raise prices. Producers have alerted us to a 10-15% increase in the cost of products. The decision by the Energy Regulatory Office of the Czech Republic will substantially escalate their electricity costs, and the government has declined assistance. A 3% VAT reduction won’t bridge this gap.”

Disappointment marked the Minister of Agriculture’s response to the meeting. Vyborný expressed his disillusionment, stating, “Retail chain representatives assured me that the VAT reduction would genuinely impact food prices. Today, I am disheartened to hear that prices will surge from January 1st.”

He pressed retail chain representatives at the meeting about the higher cost of products in Czech supermarkets compared to neighboring countries.

Unfortunately, a clear answer was not forthcoming. “Even the VAT difference fails to explain why products in Czech supermarkets are 70% more expensive than in Poland. The practice of retailers selling some products with mark-ups of several hundred percent is unacceptable. I struggle to comprehend selling a kilo of carrots for CZK 9.3 and retailing it for CZK 27.9 – a staggering 261% mark-up.”

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Vyborný stressed that neither his department nor the government possesses legislative tools to intervene in the market and influence pricing.

Instead, he intends to exert informal pressure on retail chains and encourage the Office for the Protection of Competition to take a more active role.

According to the head of the Ministry of Agriculture, there are no objective grounds for the rise in product prices.

He cited the example of Madeta, the largest Czech producer of dairy products, which announced a 3-5% price increase last week due to rising electricity and fuel costs, despite a significant decrease in wholesale milk prices.

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