The government has announced plans on how it is going to make savings. VAT will be increased, reduced on selected foodstuffs and a new tax will be added

The consolidation includes an increase in the basic rate of value added tax to 23% and at the same time a decrease in its reduced rate to 5 %, as well as the introduction of a financial transaction tax for companies or an increase in the corporate tax from a certain level of income.

This was announced on Tuesday by Prime Minister and chairman of the strongest ruling party Smer-SD Robert Fico in the presence of other coalition partners.

Consolidation is essential, says PM

Consolidation is necessary, he said, because the current government inherited the worst public finances in the entire European Union from previous cabinets.

"It is inevitable because we have to be solid and responsible partners. We voluntarily joined the eurozone and since we are part of it, we have to respond to certain rules that exist in this environment," Fico stressed. If the government did not "clean up" public finances, the result could be more expensive loans or a deterioration in the international rating of Slovakia, he said.

At the same time, however, the agreed consolidation is also socially sustainable, the prime minister stressed. "We can jointly declare that we have found a balance and today this consolidation does not only go after people, this consolidation also goes after legal entities, companies, banks. Everybody in this state had to come together in some way to come to this decision," he assessed.

Lower VAT on food, medicine and rent

He highlighted the "historic compromise" in the area of VAT regulation, which, according to Fico, is balanced. The result should be, among other things, cheaper food.

"We have agreed that as far as VAT is concerned, we are introducing a basic rate of 23 %, with the proviso that as far as all other foodstuffs are concerned, they will go to a 19 % rate and those basic foodstuffs where we introduced 10% VAT a few years ago will go to a 5 % VAT rate," he said.

Medicines, textbooks, rental housing and tourism accommodation services would also fall under the lowest rate. In addition to some foodstuffs, energy, for example, should also fall under the 19 % rate.

Financial transaction tax

"I am delighted that the government has decided to introduce a financial transaction tax. There have been a lot of lies described in the media that we are going to introduce this at the expense of the people, it is not true. This tax will apply exclusively to legal entities," Fico said. According to him, the taxation of companies with an income of over 5 million euros should also be increased.

The prime minister also confirmed that the government will change the parameters of the tax bonus and the so-called parental pension. On the other hand, pensioners will receive a full 13th pension from this year.

"No one can say that we would make a decision that would reduce the amount of money that pensioners will receive," he stressed.

Watch the government's full press conference.