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Senate Approves Austerity Package and Passes It To President Pavel To Review

The package, focused mainly on tax changes, will now be presented to President Petr Pavel for his signature. Credit: Freepik.

Prague, Nov 9 (CTK) – The Senate yesterday approved the government’s consolidation package, which is supposed to help the government improve the state budget by a total of up to CZK 150 billion over the next two years. The package, focused mainly on tax changes, will now be presented to President Petr Pavel for his signature.

If the president wants to veto the package, he has 15 days to do so. Pavel previously welcomed the government’s efforts to consolidate the public finances. Of the 74 senators present, 53 voted in favour of the package, well over the required 38 votes.

As the Senate approved the bill, it did not vote on the motion to reject, which was raised by the ANO and Social Democrat groups, or on the amendments.

Senators debated the bill for about seven hours. A number of them had reservations about the draft and some proposed amendments. Finance Minister Zbynek Stanjura (ODS) assured senators that the package would not bring dramatic effects, as some of its critics have argued.

Some senators criticised the reductions in the budget allocation of taxes to municipalities and regions.

The debate also touched on the taxation of still wine. Vaclav Laska, chairman of the SEN 21 and Pirates senatorial club, proposed taxing still wine for large wine companies, which Mikulov senator Rostislav Kostial (ODS/TOP 09) described as “a blow below the belt.” The package does not include taxation of still wine.

Stanjura said he was sure that the impact of the package would not be as dramatic as those who predict “gloomy scenarios” believe. He said the Czech economy is much more resilient than it looks, and pointed to the Czech Republic having the smallest gap between the rich and the poor and the fewest young people at risk of poverty, while domestic unemployment has been extremely low for a long time. As he had done earlier in the Chamber of Deputies, he said the country needed to consolidate public finances, which were not in good shape.

“I consider this bill a bold step and a very worthy compromise,” he said. “I believe the bill is balanced,” he added.

The package amends about six dozen laws and includes mainly tax changes. For example, it introduces a two-rate value-added tax of 12 and 21%. The lower rate will mainly cover foodstuffs, while some services and draft beer will move to the higher rate. The corporate tax rate is increased from 19 to 21%. Property tax will increase by an average of 1.8 times. The excise tax on alcohol will rise by 10% in the next two years and 5% the following year. The package does not include a tax on still wine.

The Senate, on a proposal by the chair of the Senate’s economic committee, Miroslav Plevny (STAN), adopted an accompanying resolution in which it commends the government’s efforts to stop the expansion of budget deficits and considers the consolidation of public budgets to be a necessary step. At the same time, it called on the ministries to consider reinstating tax breaks for employee health benefits and revising the regulation of the meal allowance.

The Senate also recommended to the ministries the protection of energy-intensive industries, possible corrective measures for labour agreements and a possible reduction in the tax rate for bottled mineral and infant water. The government should also consider not changing the taxpayer’s rebate for carers and the disabled, following a proposal by the Christian Democrats (KDU-CSL). It should also consider relaxing the legal restrictions on less harmful alternatives to smoking tobacco products.

Senate head Milos Vystrcil (ODS) informed senators that he had agreed with Stanjura to forward all accompanying resolutions and amendments to him, regardless of whether they are adopted. Senators should then receive them back with the ministry’s statement on their possible use.

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