Government’s Austerity Package Passes Second Reading in Chamber of Deputies

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A final vote on the package is scheduled for the end of September. Credit: Poslanecka Snemovna.

Prague, Sept 8 (CTK) – The government’s budget consolidation package passed through its second reading in the Chamber of Deputies yesterday, following more than 16 hours of discussion. Many amendments were proposed to the package, mostly by opposition MPs.

The opposition did not succeed in returning the package to the lower house budget committee for further debate.

A final vote on the package is scheduled in the lower house at the end of September.

The austerity package includes a range of tax changes, which are forecast to improve the state budget balance by CZK 97 billion next year and by CZK 150 billion over the next two years.

The Chamber started dealing with the draft consolidation package at its regular September session, the agenda of which was approved after a 19-hour debate on Wednesday, including a six-hour speech by opposition leader Andrej Babis (ANO).

Finance Minister Zbynek Stanjura (ODS) previously assured MPs that he would study all proposals for changes to the package, including those from the opposition. However, he said he would not support any changes that would reduce the planned budget savings.

Stanjura said yesterday that the Czech public finances were not in a good condition, and so it was necessary to do something. Two kinds of measures can be adopted to cut the budget deficit: raising taxes or cutting spending, or a combination of these, and none of these are popular, Stanjura stressed.

Former prime minister Babis said today that no consolidation package was needed. During the debate, MPs from Babis’s ANO party and the far-right Freedom and Direct Democracy (SPD) said that the government was raising taxes significantly, which would have a disastrous impact on both households and firms.

Babis said the government should instead make investments, while SDP parliamentary leader Radim Fiala said the government should rather cut unnecessary spending.

The government package mainly alters tax laws. It cancels some exemptions from income tax and introduces two instead of three rates of the value-added tax. Opposition MPs want to put sanitary pads, fresh flowers and bottled water for babies at a lower VAT rate. The Pirates also pushed to move sanitary pads to a low VAT rate. Pirate parliamentary group leader Jakub Michalek said in August that the government parties did not agree on the lower VAT rate for sanitary pads and bottled water for babies.

Newspapers were moved to a lower rate, which had not been originally planned.

The opposition also called for an increase in state support for home-building savings, while the government wanted to reduce this support.

Real estate tax will go up by 80%. This tax will go to municipalities, although the government originally wanted a part of it to go to the state. To compensate, municipalities will receive less in some income taxes.

Income tax for companies will increase from the current 19% to 22%.

The opposition called for the deletion of several parts of the package, and for many others to be moderated.

The lower house session ended yesterday and will continue this morning, mostly dealing with other bills in their second reading.


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