Finance Minister Zdravko Marić has announced that starting from the beginning of 2019 the government would cut the VAT rate from 25 to 13 percent on fresh meat, fresh fish, fruits, vegetables, diapers, live cattle and eggs. The logical question is whether large retail chains will lower the food prices for end consumers or whether they will pocket the difference and extra money, reports Index.hr on November 16, 2018.
According to the responses sent by the retail chains, consumers should feel the difference. “Since customer satisfaction is always at the centre of our business, the prices will be adapted to their advantage. If the law is passed, Lidl’s buyers will feel the tax cuts when purchasing fresh fruit, vegetables, meat, fish, eggs and diapers in Lidl's stores,” said Lidl.
This was also confirmed by Kaufland, which also plans to lower the prices of these products. “If the announced VAT reduction is implemented, we will surely adjust our prices so that the new food prices will be lowered to the full extent of the VAT reduction, which means that the announced VAT change will have a positive effect for our customers,” said Marija Franić, head of the Corporate Communications Department, Kaufland Croatia.
If the VAT rates on individual products are lowered, Tommy Split will also adjust the retail prices down, at least by the percentage of the VAT reduction. They say it is in their interest to make their products more price competitive and make consumers feel the positive effects of the new tax measures.
“We also hope that suppliers will not increase their prices, as this is also a prerequisite for lowering consumer prices when implementing the new VAT rates,” said Dario Mamić from Tommy Split’s corporate communications department.
Konzum also explained that everything depends on suppliers and, if they lower food prices, Konzum would do the same. “Konzum welcomes every move in the supply chain that leads to lower product prices for our end customers, especially when it comes to key consumer goods from the consumer basket. To make the buyers in the stores really benefit from the reduction in the VAT rate on certain products, the lower VAT rates have to be incorporated in prices by all those involved in the supply chain,” said Konzum.
If all of their suppliers, in line with good business practices, do so, they will be able to pass the reduction in the VAT to end consumers. “Konzum will definitely not use the reduction in the VAT rate to increase its margins, and we believe that other companies will do the same,” said the company.
Spar and Plodine are yet to send their answers.
For more on Croatia’s retail trading industry, click here.
Translated from Index.hr (reported by Martina Pauček Šljivak).
