VAT rate cut has lesser impact than expected
Friday, February 17, 2006, 14:16
Hungary's inflation rate fell from December's 3.3% to 2.7% in January as a result of the VAT rate cut in the same month, slightly above analysts' expectations of 2.4%, yet still significantly lower than a month earlier, Portfolio.hu writes relying on data of the Central Statistics Office (KSH). The news comes after a great deal of uncertainty regarding the extent by which the five percentage point VAT cut would deflate prices. January's core inflation was 0.5%, which compares with 1.2% in December, while prices rose 0.1% month-on-month in January, as opposed to no change from November to December - Central Statistics Office (KSH) said.The reduction of VAT rates from the 25% bracket to 20% (coupled with a change in excise and registration tax) reduced consumer prices by 1.1% on average. Its impact was most apparent in the price of clothing and durable consumer goods, as well as certain groups of products classified as "other goods", fuels, and services.