With the latest inflation figures, inflation approached 50 percent in January, reaching the highest figure of the last 20 years. After the inflation could no longer be officially hidden, the government announced that it would reduce the Value Added Tax (VAT) on basic food in order to reduce inflation.
GOVERNMENT TRYING TO HIDE THE SMOKE OF THE FIRE
Although the reduction of VAT from 8 percent to 1 percent was touted as "good news" by the government, the step was interpreted as an effort to cover up the smoke of the growing inflation fire, rather than a permanent solution to the cost of living. The fact that the VAT reduction includes the products in the inflation basket also strengthened the comments on the “inflation trick”.
INFLATION WILL DECREASE 1,5 POINTS
Since the VAT reductions on basic food products are made in the middle of the month, the definite effect on inflation will be seen in March. According to the calculations made by economists, it was noted that if the entire tax cut is reflected in the prices, a 150 basis points, or 1,5 points, decrease can be seen in annual inflation.