Czech Tax Cuts At Stake As Gross Government Flounders

by Ulrika Lomas, Tax-Newscom, Brussels

07 April 2005

It now seems increasingly unlikely that a bold package of tax cuts for the Czech Republic will see the light of day, as Prime Minister Stanislav Gross fights to regain the support of his government.

The tax reforms drafted by Deputy Prime Minister Martin Jahn, which would shave more than $1 billion per year off the country’s tax burden, contain proposals to reduce the number of income tax brackets, of which there are currently four at 15%, 20%, 25% and 32%, to three brackets of 12%, 15% and 24%.

By so doing, the top rate of personal income tax would move into line with corporate income tax, which will be levied at a rate of 24% from next year.

However, Gross is rapidly losing support after one party in the Social Democrat-led government withdrew from the coalition last week amid allegations of a financial scandal involving the Prime Minister himself.

Further complicating matters, the Finance Ministry, with which Jahn (who is not affiliated to a particular political party) must draft his tax proposals, has expressed its support for a less comprehensive tax package that was originally drawn up by Social Democrat Finance Minister Bohuslav Sobotka.

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