In Business News this week: the fate of the government-proposed tax hikes for 2013 remains uncertain, Iraq is considering buying small arms from Česká zbrojovka, Czech exporters seek to reduce their dependence on EU markets and IKEA plans to open more stores in the Czech Republic.
The fate of the government-proposed tax hikes for 2013 which are linked to the approval of next year’s state budget remains uncertain. The prime minister’s compromise proposal according to which only the lower VAT bracket would be raised by a percentage point instead of both has not won over the six rebel Civic Democrat deputies who have been blocking the bill. The lower house was expected to vote on the legislation next week and the prime minister had linked his government’s future to the outcome of the vote but according to the ctk news agency the senior governing party is now considering getting the vote postponed until after its election conference on the first weekend of November. According to the news agency’s sources the prime minister would like the conference to pass a resolution binding all party MPs to support the bill.
Meanwhile, economists are warning that continuing uncertainty regarding tax changes is having a far worse impact on the economy that the proposed 1 percent hike itself. David Marek, chief economist at Patria Finance says it is high time for companies and the public to learn what tax rates will be in force next year and notes that the government should strive for a few years of tax stability which would allow entrepreneurs to plan ahead. If no agreement on VAT is reached, a single VAT rate of 17.5 percent would come into force as of next year according to legislation already in force.
The Česká zbrojovka arms maker this week reported on an emerging arms deal with Iraq. According to the company’s sales manager the Iraqi delegation which visited Prague earlier this month expressed serious interest in the company’s Bren assault rifles, Scorpion submachine guns and Phantom pistols. The size of the purchase is still being discussed. Česká zbrojovka’s sales in 2011 exceeded two billion crowns; the highest turnover in the company's history. Iraq will also buy 28 Czech L-159 training aircraft worth one billion US dollars.
Czech exporters are increasingly turning to markets in Eastern Europe, Asia and Latin America within a government drive to reduce the country’s dependence on EU member states. According to a survey made among Czech exporters, local firms are increasingly tapping business opportunities in Russia, Ukraine and Belarus and there is increased interest in Asian and Latin American markets. Russia was named most frequently for its export potential -by 31 percent respondents. Ukraine with 29 percent placed second and Brazil with 28 percent third, followed by Kazakhstan and India. From the Arab states, Egypt and Saudi Arabia and United Arab Emirates reportedly present the biggest opportunities.
The Swedish furniture chain Ikea plans to open three new department stores in the Czech Republic in the next 3 to 6 years, spending some 4 billion crowns on the new outlets, the chief executive of the company’s Czech branch Marek Feltl told the CTK news agency this week. The new department stores are to be built in Prague, Plzen and Hradec Kralove. Ikea raised its sales in the Czech Republic by 5 percent to 7 billion crowns in the financial year ending in August. This year Ikea expects a 4 percent growth of turnover. Ikea also plans to launch a new online shop in the Czech Republic within the next three years.
The number of dollar millionaires in the Czech Republic grew by more than 5 percent to over 17,000 last year, while worldwide the growth did not exceed 1 percent, according to a report produced by the companies Capgemini and RBC Wealth Management. The increase in the number of rich people in the Czech Republic was influenced by GDP growth, relatively low inflation and the strength of the crown. In contrast, a drop in real estate prices and a decrease in market capitalisation had a negative impact.
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