Value added tax

The system of value added tax {VAT] in the Czech Republic has been effective since 1993 within the context of introducing a new taxation sys­tem. Although the Czech National Council's Law no. 588/1992 of the Collection which regulates this system is amended nearly every year we can say that the development of this administratively highly demanding tax has not ended yet.
Value added tax is not only the basis of indirect taxation in the Czech Republic. At the same time it is the basis of the whole taxation system in which it replaced the former turnover tax and tax on importations that could not be conformed to the conditi­ons of the free market economy that was then being built in the Czech Republic. It is interesting to ob­serve the development of value added tax with regard to the unsteady demands of the domestic economic system and the efforts of the VAT legal regulation to react to this unsteadiness.
Value added tax belongs to the system of indirect taxes which affect consumption and affect, therefore, more the part of the population that has lower inco­me. As such they represent a regressive taxation as compared to the amounts of income. Right choice of the indirect taxes rates is therefore very important also with regard to maintaining social balance.