In a significant legislative move, the Senate has given its approval to the government’s consolidation package, designed to enhance the state budget by up to CZK 150 billion over the next two years. The package, primarily focused on tax adjustments, has garnered Senate support and is now set to be presented to President Petr Pavel for his signature.

With 53 out of 74 senators voting in favor, well exceeding the required 38 votes, the bill successfully passed through the Senate. The bill’s approval negated the need for a vote on the motion to reject raised by the ANO and Social Democrat groups, as well as any amendments proposed during the extensive seven-hour Senate debate.

Finance Minister Zbynek Stanjura (ODS) addressed senators’ concerns during the deliberations, emphasizing that the package’s impact would not be as dramatic as some critics have suggested. He reassured that the Czech economy possesses resilience and cited favorable indicators such as the minimal wealth gap, low youth poverty risk, and sustained low domestic unemployment.

Criticism was raised during the Senate debate regarding reductions in budget allocations for taxes to municipalities and regions. Additionally, discussions touched upon the taxation of still wine, with a proposal to tax large wine companies, which was not included in the final package.

The comprehensive package encompasses amendments to approximately sixty laws, predominantly focusing on tax modifications. Notable changes include the introduction of a two-rate value-added tax (VAT) system at 12% and 21%, with the lower rate covering primarily foodstuffs. The corporate tax rate is elevated from 19% to 21%, while property tax sees an average increase of 1.8 times. Excise tax on alcohol is set to rise by 10% in the next two years and 5% in the subsequent year.

In a complementary resolution, the Senate commended the government’s efforts to curb budget deficits and emphasized the necessity of public budget consolidation. Recommendations were put forth, urging ministries to reconsider tax breaks for employee health benefits and review regulations for meal allowances. The Senate also advised protection for energy-intensive industries, corrective measures for labor agreements, and potential reductions in the tax rate for bottled mineral and infant water. The government is further urged to explore maintaining the taxpayer’s rebate for carers and the disabled and relaxing legal restrictions on less harmful alternatives to smoking tobacco products.

Article by Prague Forum