Gov't resubmits tax package to parliament

Prague, Sept 6 (CTK) - The Czech government yesterday again submitted the package of tax changes, including a controversial VAT increase, to the Chamber of Deputies and it linked it with a vote of confidence.

The Chamber of Deputies did not override a senators' veto last night as six deputies for the senior government Civic Democrats (ODS) voted against the package. This has been the first time that the coalition government of Petr Necas (ODS) failed to push its major reform bill through the lower house of parliament.

In reaction, the government approved the stabilisation package of tax changes again this morning and linked it with a confidence vote. This will be the first time that a Czech government tied a vote of confidence with a particular bill.

The lower house may discuss the package at its next regular session opening on September 18.

The government also asked the house to deal with the package within three months, or by December 6.

The government will fall if the lower house rejects the bill. If the house did not deal with the bill within the three months, it would be dissolved.

The six ODS rebel deputies headed by Petr Tluchor especially criticised the planned increase in both VAT rates by 1 percentage point to 15 and 21 percent as of 2013.

Finance Minister Miroslav Kalousek (TOP 09) said he did not see much manoeuvring space because the government would not drop its plan to get the next year's budget deficit under 3 percent of GDP.

Along with a VAT rise, the bill imposes a tax on people with high incomes, reduces the refund of consumer tax on diesel for farmers and unifies welfare benefits for housing.

According to the Finance Ministry, the changes introduced by the package may save nearly 22 billion crowns next year and more than 31 billion crowns in 2014.

Necas said minor modifications to bill were possible but only if they are agreed by the coalition.

The ODS leadership will start negotiating with the rebels next week.

($1=19.699 crowns)