Final Word from Wednesday, March 24, 2004

Prague's small restaurants and hotels are one of its nicest features. The finance ministry intends to raise the VAT on restaurants and hotels, and the American Chamber of Commerce estimates that the biggest effect will be on the small operators. For many, this will be the final nail. The ministry expects to raise billions from the tax hike, but it hasn't presented a convincing evidence that the revenue from the higher VAT will in fact compensate for losses in tax revenue from establishments that must close and from lower overall spending. KFC told the Prague Post that it's rethinking its investment here because of the tax change, but it and other big operators will actually be the best-equipped to weather the storm. Over the long term, the VAT increase will help them to consolidate their market position, and Prague will lose some of its quaintness in the process. value-added tax


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FS Final Word