In this week’s business news: An increase of the lower category VAT has gone into effect, Czech online discount sites see steep increases in sales, hard liquor consumption is on the decline, Škoda Auto has sold a record number of cars in 2011, and the Czech Agriculture and Food Inspection Authority says that 15 percent of food products it inspected in 2011 failed to meet its quality standards.
An increase of the lower category of value-added tax from 10 to 14 percent has come into effect January 1. The lower VAT is charged on products such as books and newspapers, medicine and food, as well as housing and accommodation. Business sectors that were hardest hit by the economic crisis, such as construction and tourism, are likely to be most affected by the new legislation. Experts predict that the increase in rent for businesses will be felt across all sectors. The higher VAT rate has been decreased from 19 to 17.5 percent, with both rates set to be unified at 17.5 percent next year. However, some economists fear that a drastic contraction of the economy in 2012 may further deepen the state budget deficit and lead to an increase of this planned unified rate.
Czech online discount sites have seen record sales of 1.95 billion Czech crowns in 2011. According to the director of the discount search engine Srkz.cz, Petr Kováčík, some 5.5 million coupons were sold online in the Czech Republic last year. Sales peaked ahead of Christmas in December, with a monthly volume of 302 million crowns. Most in demand were coupons for food and drink, cosmetic services as well as leisure and tourism. Some 250 discount sites are currently operating on the Czech market. Their popularity has grown exponentially since they first appeared in the country two years ago. In 2010, the sector saw sales of hundreds of millions of crowns.
Consumption of hard spirits in the Czech Republic saw a drop by 3 percent in 2011, the weekly Týden reported. While Czechs consumed 60 million liters of hard alcohol in 2010, the figure dropped to 58 million liters last year. In 2010, the consumption of hard liquor dropped by 14.6 percent, due to an increase to the exise tax, following several years of stable sales. Beer and wine consumption were on the rise in 2011, by 1 and 4 percent respectively, with cheap brands the preferred choice of most consumers. Another hike in the excise tax is scheduled for 2012.
Škoda Auto sold a record 875,000 cars in 2011, which represents a year-on-year sales increase of 15 percent. In the first three quarters of 2011, the company doubled its profits as compared to the previous year, to 14.6 billion Czech crowns, or 588 million Euros. The upwards trend was evident in the majority of Škoda’s markets, with a remarkable 50 percent sales increase in India. Sales in Germany, Russia and China were also dynamic, a company spokesman said. Škoda has announced that it is planning to further expand business in 2012 and will be introducing a new model this year. In 2011, the company had introduced two new makes: the Sedan model Rapid and the smaller model Citigo. Škoda plans to be selling 1.5 million cars yearly by 2018.
The Czech Agriculture and Food Inspection Authority has confirmed that about 15 percent of the food products it inspected in 2010 did not meet its quality standards. In addition, cases in which producers deliberately rip off customers are on the rise, a spokesman for the authority said. Jams, wine, honey and cured meats were among the goods where the lowest quality was found. In one case, a sample of jam only contained 15 percent real fruit, while in another case, a wine sample was shown to consist of 73 percent water. Mechanically separated meat was found in meat products at 12 different retailers. The worst offenses against food quality are found in the lowest price categories as a consequence of strong pressure to keep prices low. According to inspectors, the relatively strict local food quality regulations were replaced by laxer EU norms after the Czech Republic joined the EU.