Lower house approves government’s crucial tax hikes

The Czech government on Wednesday won a vote of confidence in the lower house of Parliament which approved its tax legislation. In an unexpected turn of events, the senior coalition party, the Civic Democrats, found a solution to an inner-party conflict which threatened to topple the government: three Civic Democrat deputies who were opposed to the government’s tax bills resigned as MPs, allowing the government to continue.

Miroslav Kalousek shakes hands with Petr Tluchoř, photo: CTK

The lower house of Parliament on Wednesday approved the Czech government’s long-debated tax legislation for 2013. At the same time the government won a vote of confidence tied to the tax bill.

The tax package, among other things, increases the two VAT rates by one percent to 15 and 21 percent, respectively. The legislation also introduces an extra income tax for people who make more than 100,000 crowns a month, and reduces the amount that can be written off against tax. The lower house’s vote paves the way for the approval of the state budget for 2013 which was based on revenues introduced by these tax hikes.

The vote is also a major success for the Czech centre-right government which had for weeks been fighting for survival. It even lost its majority in the lower house when six Civic Democrat deputies refused to back the tax hikes, quoting traditional party values as the main reason.

But a last-minute deal between party leaders and the rebel MPs saved the day: before Wednesday’s vote, three of the deputies resigned from the lower house; two swallowed their objections and supported the bill and one deputy left the room to lower the quorum. One of the rebel MPs, Petr Tluchoř, explained why.

Petr Tluchoř, photo: CTK

“We wanted to bring about change at the recent party congress but our arguments were rejected. But we do not want the government to fall, and the communists to rise to power. We therefore agreed that MPs Ivan Fuksa, Marek Šnajdr and Petr Tluchoř would resign as MPs to avoid having to vote for tax hikes, and at the same time avoid bringing about the demise of the cabinet.”

In the end, 101 MPs in the 200-seat lower house supported the bill, backing the government in the vote of confidence linked to the draft legislation. The government’s tax package will now be debated in the Senate, controlled by the opposition Social Democrats. The Senators are therefore likely to reject it, as Social Democrat leader Bohuslav Sobotka announced shortly after Wednesday’s vote.

“I think the most likely development is that the Senate will reject the tax package without attempting to make any amendments to it. I expect the coalition will then have to muster 101 votes in the lower house to overturn the Senate veto.”

The cabinet can however rely on the narrow majority of 101 MPs in this and other upcoming votes, such as those on the state budget as well as on two other pieces of its programme: the pension reform and the restitution of church property. That would mean that after months of uncertainty concerning the cabinet’s future, its reform agenda is back on track.

Roman Pekárek, photo: CTK

But having put down the revolt in their own party, the Civic Democrats are now faced with a new problem. One of the new MPs who replaced the three rebel deputies, Roman Pekárek, landed a six-year sentence for corruption, and is now awaiting an appeal hearing. Civic Democrat leaders are hoping he not embarrass the party and resign, something he has no intention of doing.