VAT increase in January 2001

29/06/2005 14:38

In January 2001 the general rate of VAT was raised from 17.5 to 19 percent. The reduced rate remained the same at 6 percent. Some articles are exempt from VAT.

It is not possible to pinpoint the exact consequences of the VAT increase for every price of every article. Prices of some articles may not have been adjusted so that shopkeepers themselves pay the extra VAT. In other cases items may have been increased by a larger amount as the opportunity is taken to adjust the price to other cost increases or raise the profit margin. The adjustment to the higher rate of VAT may also have taken place at a later date, for example after the January sales. In this regard there is no difference with the possible effects of introduction of the euro in 2002.
What can be calculated is what the price excluding VAT would have been, and what the development of prices would have been. The VAT effect is calculated by multiplying the prices of articles subject to the new higher rate of VAT in 2001 by 117.5/119 and comparing these prices with prices in 2000.

Inflation increased form 4.2 to 4.5 percent between January 2001 and February 2001. This may have been caused partly by later adjustments to the higher VAT rate. These delayed adjustments may still have an effect on inflation in January 2002.