The Czech government’s budget consolidation package, aimed at addressing fiscal challenges and introducing tax changes, has progressed through its second reading in the Chamber of Deputies after more than 16 hours of discussions. The package, which includes various tax alterations, is expected to improve the state budget balance by CZK 97 billion next year and CZK 150 billion over the next two years. The lower house of parliament is set to hold a final vote on the package at the end of September.

Throughout the lengthy discussions, opposition MPs proposed numerous amendments to the package, seeking to influence its content. However, they were unable to return the package to the lower house budget committee for further debate, as their efforts were not successful.

Finance Minister Zbynek Stanjura (ODS) assured MPs that he would carefully consider all proposed changes to the package, including those put forth by the opposition. Nevertheless, he made it clear that he would not support any alterations that would diminish the planned budget savings.

Stanjura emphasized the precarious state of Czech public finances, emphasizing that action was necessary. To address the budget deficit, measures could involve tax increases, spending cuts, or a combination of both, none of which are popular options.

Former Prime Minister Andrej Babis argued that a consolidation package was unnecessary, advocating instead for government investments. MPs from Babis’s ANO party and the far-right Freedom and Direct Democracy (SPD) voiced concerns about the significant tax hikes proposed by the government, which they believed would negatively impact households and businesses.

The budget consolidation package primarily focuses on changes to tax laws, including the elimination of certain income tax exemptions and the introduction of a simplified value-added tax (VAT) structure. Opposition MPs sought to modify the package, proposing, among other things, lower VAT rates for specific items such as sanitary pads, fresh flowers, and bottled water for babies. Ultimately, newspapers were moved to a lower VAT rate, which was not originally planned.

The package also includes an 80% increase in real estate tax, with the revenue directed to municipalities. Income tax for companies is set to rise from 19% to 22%.

While the opposition called for the deletion or moderation of several components of the package, it moved forward in the Chamber of Deputies, marking a significant step in the government’s efforts to address fiscal challenges and stabilize the state budget. The ongoing parliamentary session will continue to address other bills in their second reading.

Article by Prague Forum