Government approves public finance reform bill

The coalition government of Mirek Topolanek on Wednesday unanimously approved the first stage of broad public finance reforms. The plan brings changes to the tax and welfare systems and also introduces new healthcare fees. Now it remains for the government to push the proposal through the lower house. The coalition cabinet is in for some tough negotiations this summer as the opposition is firmly against the reforms and the government cannot even rely on the support of all coalition MPs.

Photo: CTK

The government of Mirek Topolanek has brought a series of reforms and spending cuts, first unveiled in early April, together in one bill which it is now going to submit to the lower house for discussion. Prime Minister Mirek Topolanek:

"We have solved all problems and disagreements. The whole file is about 15 centimetres thick. There were no disagreements as to the healthcare area submitted by Health Minister Tomas Julinek or the social system reform submitted by Labour Minister Petr Necas. Those had been approved earlier."

Mirek Topolanek, photo: CTK

The reforms, which are meant to save tens of billions of crowns of state money, introduce a flat fifteen-percent personal income tax. The plan also raises the lower VAT rate from five to nine percent and abolishes automatic increases of certain welfare payments. Moreover, it introduces a 30-crown fee charged for every visit to the doctor's and a 60-crown fee per every day spent in hospital. The fees will not affect expecting mothers as well as small children or children with chronic illnesses.

The government also accepted the Greens' proposal that households using natural gas for heating be exempted from the environment tax. The reform plan abolishes sickness benefits in the first three days of an illness, gives incentives to mothers who opt for a shorter maternity leave, and also proposes a gradual decrease of the corporate tax.

Vlastimil Tlusty, photo: CTK

The reform package will be presented to Parliament in June. However, its fate remains unclear in a lower house split down the middle and with rebel MPs in both the coalition and opposition benches. The harshest critic from within the ruling coalition remains former finance minister Vlastimil Tlusty of the Civic Democrats. He says the form of the tax system change is so important for him that he might not vote for the government-proposed bill.

"What is included in the government's package is not a tax reform. Moreover it contradicts an important part of the economic programme of the Civic Democrats. I have offered a solution, a compromise, a discussion and now it is up to the government and mainly its Civic Democrat members when, where and with whom such debate will take place. If there is no compromise and the tax part stays the same, my position will be the same: no compromise, no agreement."

Trade unions have already announced they will stage protests against the government plan in June. It looks like the cabinet of Mirek Topolanek could now be in for a hot summer as it had pledged to step down if it fails to push the reforms through.