The Government`s Long Term Financial Plan

New VAT rates of 5%, 8% and 23% have been adopted by the government in the Long Term Financial Plan, to be in force starting 2011. the basic VAT rate will be increased to 23%. The VAT on raw food will increase from 3% to 5%, the rate for construction and medicines will increase 8%, and it is very likely that also basic goods will be charged more. The increase will be especially expensive to those, who spend most of their incomes on the basic goods and services. The increase will continue if the budget deficit continues to increase. Many economists claim that such policy leads to nowhere and contradicts the necessity of the situation of economic crisis – the budget deficit definitely requires attention and firm counter action, but instead of supporting the demand side, the increase of taxes will reduce it and make it more difficult to overcome the crisis.