Hop-ocalypse: Beer tax hike to leave small Czech pubs and restaurants struggling

The government’s proposal to increase the value-added tax (VAT) rate on draft beer from 10 to 21 percent will seriously harm pubs in small towns and villages, according to the Czech Association of Breweries and Malthouses. 

As part of Thursday’s large fiscal reform package, the government announced that it would simplify VAT rates, which – along with the rise in beer prices – bumps up the VAT rate of catering services from 10 to 12 percent and that for soft drinks to 21 percent.

In 2022, beer sales in restaurants were at their lowest level in the past 10 years. Just 31 percent of all beer in Czechia last year was consumed in pubs and restaurants – in 2009, this proportion was about 50 percent.

According to the director of the Association of Small and Medium Enterprises in Czechia Luboš Kastner, the government did not properly hear and evaluate restaurants’ views, and failed to consult them before announcing the reform package. 

He says that there should be a two-year transition period before the changes take effect so that businesses could adequately prepare. Kastner also criticized the fact that still wine will continue to have no consumption tax – unlike sparkling wine.

In its austerity package, the government also plans to increase the consumption tax on spirits by 10 percent next year, and thereafter by 5 percent annually until 2028. This, too, will hurt pubs and restaurants according to the Association of Breweries and Malthouses. There is also a risk, according to the Czech Union of Distillers, that the rises in VAT rates will cause increased activity on the black market.