The Czech government’s defense of the windfall tax controversy, asserting that the funds intended for the state from the six major banks were redirected to the public through higher savings account rates, faces scrutiny as the numbers do not align. The billions anticipated from a tax on extraordinary profits, which ultimately did not materialize, were allegedly channeled into the public in the form of elevated savings account rates. However, analysts and economic indicators suggest otherwise.

The claim that people benefited from higher interest rates on savings accounts last year is disputed, considering the stagnation of these rates throughout the year. Marek Pokorný, an analyst at the Port investment platform, emphasized that interest on savings accounts remained largely unchanged, with only minor exceptions. The government’s assertion that higher savings rates compensated for the lack of windfall tax income is further challenged by the fact that real incomes experienced a decline, impacting individuals’ ability to save.

Bank deposit interest rates saw a gradual increase in the fall of 2021 when the Czech National Bank raised the base rate to seven percent, approved in June of the preceding year. However, since the fall of 2022, the banks have made only cosmetic adjustments to their rate lists.

The silence from the banks when questioned about profits, levies, and savings account rates adds to the skepticism. The Czech Banking Association, in response to the windfall tax debate, mentioned that expectations regarding bank profits are deemed unrealistic. The spokesperson for the extraordinary tax, Radek Šalša, briefly stated this perspective.

Contrary to the government’s claims, high bank profits persisted in the previous year. The six major banks affected by the windfall tax reported earnings of CZK 57.1 billion for the preceding three quarters, only slightly lower than the CZK 58.4 billion in the same period in 2022. As the debate surrounding the extraordinary tax unfolds, the discrepancies between government assertions and economic realities become more apparent, raising questions about the effectiveness and impact of the proposed windfall tax.

Article by Prague Forum