The Czech Parliament on Tuesday passed a significant tax cut which will affect some 4 million Czech taxpayers next year. Employees will save an average of around 400 crowns per month - or about 13 US dollars. That isn't much but it is significant when one considers that in the Czech Republic the average monthly salary still averages only 18,000 crowns - around 800 dollars US. In that light, many Czechs will see the break as a significant step.
The lower house of Parliament has approved a series of tax cuts which will primarily benefit people whose monthly income is below 30 thousand crowns. The bill was approved unanimously, although the opposition Civic Democrats criticized the ruling coalition for not effecting tax cuts which would benefit higher income groups as well. Finance minister Bohuslav Sobotka said the measure would affect 90 percent of all tax payers and would reduce income into state coffers by an estimated ten billion crowns. Approximately four million people who make under 30 thousand crowns a month would save around four thousand crowns per year, higher income groups are expected to save less money. The bill has yet to be approved by the Senate.
The Czech National Bank surprised the financial markets by announcing a quarter point higher interest rate of 2.0 percent starting this Monday. The central bank governor said the board was concerned about inflationary pressures, in large part due to soaring global oil prices. But the minister of finance says the rate hike was premature. For the would-be Czech homeowner, it may spell the end of cheap mortgages.
The opposition right-of-centre Civic Democrats will support the government's proposal to lower the income tax. In a TV discussion programme on Sunday, Civic Democrat Vlastimil Tlusty said party deputies will vote in favour of the bill at Tuesday's lower house session. The Civic Democrats have been blocking the proposal as it only affects those with a monthly wage of up to 30,000 Czech crowns (around 1,200 US dollars); an estimated four million people. They have instead been pushing for a flat tax rate of 15 percent to include those with higher incomes. Mr Tlusty says his party has not had a change of heart but simply realises that lowered taxes for some is better than for none.
The Czech National Bank has raised interest rates by a quarter of a percent, with the benchmark two-week repo rate growing to 2.0 percent to stand level with the euro zone rate. Year-on-year inflation in September reached 2.2 percent, a marked acceleration from 1.7 percent in August. However, Finance Minister Bohuslav Sobotka questioned the central bank's decision, which he said was premature.
In this week's business news; two mobile operators to provide TV reception from next year; the OECD says of all its members the Czech Republic relies the most on social insurance to fill the state coffers; Czech Airlines records a 22 percent rise in passengers, while Prague airport also sees an increase in numbers; and real estate prices are either stagnating or falling in the Czech Republic.
Ceska Sporitelna predicts 2013 Czech entry into eurozone; Initial compromise reached with health insurance companies; Czech Republic has among the highest perceived levels of corruption in the EU; Group of Civic Democrats file criminal complaint over Unipetrol deal; Paroubek says France may be willing to relax labour market restrictions on Czechs; COI imposes record fine on Ahold supermarket chian
The Ceska Sporitelna bank has issued a report which foresees the country will not be able to adopt the Euro before 2013. It furthermore expects a rate of 25,50 crowns to the euro; the current rate stands at a little under 30 crowns. The Czech government has been working with a plan that sees the adoption of the single European currency three years earlier, by 2010 at the latest. The bank report also says Slovakia is the only member of the Visegrad Group, which also includes Poland, Hungary, and the Czech Republic, whose planned date - 2009 - is realistic.
The lower house of the Czech Parliament has approved the state budget for 2006 with a deficit of 74.4 billion crowns (an estimated 3.1 billion US dollars). The budget deficit should not exceed 4.6 percent of the GDP if the Czech Republic is to meet conditions under the EU convergence programme paving the way for the country to adopt the euro. The lower house will decide at the end of the year how the 2006 state budget is to be divided among individual ministries.
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