It is a paradox that ultimately hurts the customer. Although the value-added tax (VAT) on food served in restaurants fell to a historically low 5%, prices not only failed to drop but were now rising by almost 10%. A new analysis by the Institute for Financial Policy at the Finance Ministry (IFP) suggests that the tax cuts have led mainly to confusion, multiple VAT rates on a single bill, and ample room for tax optimisation.
The IFP notes that despite the state reducing VAT in the hospitality sector twice, prices are rising faster than overall inflation. As a result, Slovaks are paying more and more in restaurants and pubs, despite repeated tax cuts intended to ease the burden, the SITA newswire cites IFP’s findings.
The VAT reduction in the hospitality sector has become a textbook example of how tax relief does not automatically translate into lower prices. Instead, the savings often disappear into business margins, as companies use the opportunity to cover rising costs or boost profits.
Since the beginning of 2025, when VAT on food in restaurants was reduced from 10% to 5%, prices in the gastronomy sector have gone up by 7.6%. Year-on-year, September saw a 9.4% increase. Paradoxically, hospitality has thus become one of the fastest-rising service categories, despite being subject to one of the lowest tax rates.
This was already the second VAT cut for the sector. The first reduction, from 20% to 10%, was introduced at the start of 2023 as a temporary measure in response to the pandemic, but the government later made it permanent.
Aside from failing to bring prices down, the VAT cut has created considerable confusion in the system, the IFP points out. While a single VAT rate applied in 2022, businesses must now apply up to three different rates on one receipt: 5% for food, 19% for non-alcoholic beverages, and 23% for alcoholic drinks. The situation is further complicated by the difference between dining in and delivery. While customers pay the reduced 5% rate in restaurants, delivery is taxed at 19%.
The IFP warns that such complexity not only adds to the administrative burden for businesses but also significantly expands the potential for tax optimisation. The hospitality sector has long been among those with the largest tax gap – areas where tax collection remains problematic. (The Slovak Spectator)