Senate rejects government plan for VAT hike

On late Thursday evening, the Czech upper house voted to reject a key component of the government's fiscal consolidation package - a controversial rise in VAT tax rates from 15 to 21 percent. The opposition Social Democrats hold 41 seats in the 81 seat senate. Despite an in-person appeal by Finance Minister Miroslav Kalousek urging the upper chamber to pass the plan, 50 out of 72 senators present voted "no" including one member of the leading coalition party, Civic Democrat senator Jaroslav Kubera. The assembled representatives were forced to vote twice after a technical glitch annulled the first attempt. In order to overturn the Senate's decision, the lower house will now have to find 101 votes in favour of the measure. The Social Democrats have opposed higher VAT rates on the grounds that they will harm the economy, which is currently in recession, with GDP contracting by 1.2 percent in the second quarter of 2012.

Author: Dominik Jůn