Czech government threatened by tax row in lower house

A growing conflict within the senior coalition Civic Democrat party is threatening to topple the government of Prime Minister Petr Nečas. Some Civic Democrat MPs have refused to back government legislation raising the VAT rates, a bill the prime minister said was crucial for the future existence of the government. If the bill does get rejected by the lower, Mr Nečas threatened to send the exact same legislation to Parliament again, this time linked to a vote of confidence in his government.

Petr Nečas, photo: CTK

Latent tensions in the Civic Democrat party erupted just hours before the lower house was set to vote on government legislation which sought to reduce the deficit in public finances by, among other things, raising the valued-added tax.

Critics of the deals, which include President Václav Klaus, say higher taxes would only deepen the recession of the Czech economy, which is what has happened since the beginning of the year when the Nečas government raised the VAT for the first time.

When deputies first voted on the bill in July, it was backed by 95 out of 100 coalition MPs in the lower house. But the opposition controlled Senate vetoed the legislation, and the coalition needs 101 votes to overturn the veto and pass the bill.

But on Tuesday, six Civic Democrat MPs said they would not vote for it again as the plan to raise taxes ran against the values of their party.

The prime minister then raised the stakes. Should the bill get rejected Mr Nečas said, he would send the same piece of legislation back to the lower house this time linking it to a vote of confidence.

The argument has so far failed to persuade the rebelling Civic Democrat MPs, as one of them, Petr Tluchoř, said on Wednesday.

Petr Tluchoř, photo: CTK

“Our viewpoints have remained unchanged since yesterday and we will not vote for the legislation. The prime minister told us the government would pass the exact same bill tonight, and will send it to the lower house where it will be linked to a vote of confidence. There will be further debates about the legislation however and we will try to change it so that it reflects the interests of the country and the Civic Democrat programme.”

The other two coalition parties have shown little sympathy for the row within the Civic Democrat party. The architect of the legislation, Finance Minister and a leader of the TOP 09 party Miroslav Kalousek, said there was no room for re-negotiating the deal. For their part, the junior coalition LIDEM party refused to back another crucial government bill – that on the restitution of church property – until the row is settled.

I asked Deputy Prime Minister, and LIDEM leader Karolína Peake, whether she thought a compromise could be found.

Miroslav Kalousek, Karolína Peake, photo: CTK

“I have only been in politics for two years but even in those two years I have seen many situations that seemed like they had no solution and nobody was willing to compromise. But if there is a will to continue with the government and not to turn the rule over to the Communists and Social Democrats, then there should also be a will to find a compromise.”

So are you confident there is a will to save the government?

“I very much hope that internal games within the Civic Democrats will not triumph over the will to maintain the stability of the country.”

Some commentators say that the row within the Civic Democrats is related to an upcoming congress of the party which will in some three months’ time elect a new Civic Democrat leadership. But political analyst Jiří Pehe says the prime minister’s move might in fact bring about the end of his government.

“In my opinion, the prime minister really risks the fall of his government. I also think he may be underestimating the influence of President Václav Klaus who has been critical of this law. In fact, his criticism, just like that of some of the deputies, seems to have deeper roots and is an expression of general dissatisfaction with the Nečas government.

Václav Klaus, photo: archive of the Czech Government

“So I think the prime minister is playing into the hands of those who want to see his government fall and I’m afraid that if he connects the law with a vote of confidence, the government will indeed fall.”

The lower house of Parliament is set to vote on the tax legislation later on Wednesday. It will then be clear whether Mr Nečas’ strategy worked or whether he will put his governments’ future on the line.