Business briefs

Cabinet approves Finance Minister's tax cut proposals; State budget would lose 10-15 bn crowns in annual budget due to tax cuts, offset by excise and VAT rate hikes; Deputy finance minister resigns under suspicion of Peruvian bad debt fraud deal; Czechs add Canada, Serbia & Montenegro to 'green card' programme, Ukraine is next; Cesky Telecom sale finalised, OECD says Czech welfare Europe's 'most efficient', TV Nova owner CME may list shares on Prague bourse, price of electricity set to increase

Cabinet approves Finance Minister's tax cut proposals

The Cabinet has approved a proposal by Finance Minister Bohuslav Sobotka to cut income tax rates as of January 2006. If signed into law, it would mean a break for nine out of ten Czechs—those earning less than 30,000 crowns a month, the equivalent to about $1200. With the bottom personal income tax rate dropping from the current 15 percent to 12 percent, and the second rate dropping from 20 to 19 percent, most taxpayers would save about $100 dollars a year. The proposal is seen as a response to the main opposition Civic Democrats' call for a 15 percent flat tax.

State budget would lose 10-15 bn crowns in annual budget due to tax cuts, offset by excise and VAT rate hikes

The move will deprive the state budget of some 10 to 15 billion crowns in annual revenues, said the finance minister. But Mr Sobotka said that faster economic growth and higher revenue from excise duties and VAT, both raised last year, would offset the loss. Meanwhile, the Senate has approved a law that would allow the state to issue up to $3 billion in bonds to help cover this year's state budget deficit. The bonds would likely be issued on both domestic and foreign markets. The remainder of the deficit would be covered by long-term loans from the European Investment Bank.

Deputy finance minister resigns under suspicion of Peruvian bad debt fraud deal

A deputy finance minister has resigned under suspicion of fraud. Ladislav Zelinka, who was responsible for the ministry department that oversees the collection of bad government debt in Latin America, reportedly hired an outside collection agency called Anper to collect on a debt from Peru long after the debt in question had been collected. The Anper agency was paid a 95 percent collection fee of 46 million crowns, or roughly $2 million. This was not the first time that Mr Zelinka has come under suspicion of defrauding the Czech state. He was involved in the untransparent sale of Russian bad debt and in controversial arbitration cases, including those related to the failed IPB bank bought by Nomura, of Japan.

Czechs add Canada, Serbia & Monenegro to 'green card' programme, Ukraine is next

President Vaclav Klaus and his Ukrainian counterpart Viktor Yushchenko, photo: CTK

The Czech Republic, which anticipates a shortage of several hundred thousand workers within a few decades, has expanded its fast-track residency programme for "qualified workers". As of July this year, citizens of Serbia & Montenegro and Canada become eligible to apply for permanent Czech residency after two and a half years of employment here, rather than the usual ten years. In January 2006, citizens of Ukraine, who, after Slovaks make up the largest group of foreigner workers here, will also be eligible. In related news, the Czech president and his counterpart in Ukraine have agreed to look at facilitating the issuance of short-term work permits. Some 200, 000 Ukrainians live in the Czech Republic, including workers currently employed illegally here, mainly in the construction industry.

Cesky Telecom sale finalised, OECD says Czech welfare Europe's 'most efficient', TV Nova owner CME may list shares on Prague bourse, price of electricity set to increase

In other business news this week, the purchase of the state's majority stake in Cesky Telecom by Telefonica of Spain has been finalised: on Wednesday, the Spanish telecommunications company paid the remaining 90 percent of the purchase price of some $3.5 billion; the OECD said in a study that the Czech Republic has Europe's most efficient welfare programme, in terms of percentage of GDP it accounts for; and CME, the American company that regained control of TV Nova this year, has applied to list its shares on the Prague bourse; and the price of electricity is due to rise about 10 percent annually for the next few years, before stabilising.