Czech Government Agrees Tax Package To Pay For Flood Damage

by Ulrika Lomas, Tax-News.com, Brussels

11 September 2002

It emerged this week that the Czech government has accelerated plans for an overhaul of the country's tax system in order to help pay for the damage caused by August's flooding.

The tax package recently agreed by the cabinet includes measures to increase the top rate of VAT from 5% to 7%, hike consumption taxes on spirits and tobacco, and temporarily raise the highest rate of income tax from 32% to 35%.

It is hoped that these emergency measures will raise some Kc100 billion ($3.3 billion), covering almost a third of the flood costs.

However, the package has been condemned by economists, who argue that the government should have considered reducing other spending or making use of privatisation receipts before putting up taxes.

'This tax will raise emotions more than revenues,' Radomir Jac, chief economist of Commerzbank in Prague told the Financial Times following the government's announcement. 'If we want the economy to recover we can hardly do it through higher taxes.'

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