The Czech government has accepted a new reduced 10% VAT rate from January 1, 2015 andthis rate will be used on medicines, pharmaceuticals, e-books and baby foodstuffs. Under the EU VAT Directive, member states are permitted two reduced VAT rates.  The cost of initiating 10% VAT rate was actually estimated at CZK4.2bn (USD200m) annually, but new reports add a cost to the measure of just CZK2.9bn.