The Czech public finance deficit fell in 2013 to 1.44 percent of Gross Domestic Product from 4.2 percent in 2012, the Czech Statistics Office announced on Tuesday. That performance would put the country in line to join the euro zone on the public deficit criterion for the first time since 2008. The government is counting on a public deficit below 3.0 percent this year as well. In separate figures, the office revised downwards its previous growth figure for the last quarter of 2013 to 1.2 percent year on year and 1.8 percent quarter on quarter. The Czech economy shrunk by 0.9 percent over the whole year.
The Finance Ministry is planning to introduce a third rate of value added tax in 2015, Finance Minister Andrej Babiš said. The rate, whose level has not yet been determined, should be lower than the existing rates of 21 and 15 percent, respectively, and should apply to drugs, books, and baby food. The Finance Ministry also wants to make tax collection more effective by establishing a central registry of bank accounts and retail receipts. Details of the Finance Ministry’s plans are yet to be debated within the coalition parties; for its part, the opposition said they would increase the overall tax burden and would make tax evasion easier.
The Czech economy grew faster in the last quarter of 2013 than originally predicted with a GDP growth of 1.9 percent against the previous quarter. This constituted a 1.3 percent expansion year on year. In the whole of last year, the GDP contracted by 0.9 percent which was also a better figure than the original estimate. The country came out a drawn-out recession only last year and the boost in growth at the end of 2013 came after the central bank intervened massively to weaken the crown as a means of fighting deflation risks. The forex interventions encouraged consumer spending with shoppers trying to get ahead of expected price rises this year due to costlier imports.
The police have charged former prime minister Petr Nečas with corruption. The case is related to a bribery scandal which toppled his government last June and investigators say it could re-define the rules of political deal-making. Mr Nečas, meanwhile, considers the charges a revenge for a lawsuit he filed against the police. More
Prime Minister Bohuslav Sobotka said he would punish an employee of the Social Democratic party secretariat who made several mistakes in a formal document addressed to President Zeman requesting the appointment of the new government. Mr Zeman highlighted the errors at the appointment ceremony on Wednesday; the document stated wrong names of two ministers, and requested the appointment of two health ministers, omitting the agriculture portfolio. Mr Sobotka said the errors occurred because the staff was overworked, and said the author of the document would have their salary cut.
Incoming finance minister Andrej Babiš sometimes gives the impression that he is shooting from the hip before he has even warmed the seat of his ministerial chair. But his assertion about the Czechs poor performance on collecting Value Added Tax is pretty much on the mark. More
Three former Civic Democrat MPs have made a claim for compensation after being held in custody in connection with alleged bribe-taking but released without charge. Then party rebels Petr Tluchoř, Marek Šnajdr and Ivan Fuksa were last year accused of taking bribes in the form of lucrative posts at semi-state companies in exchange for preventing the fall of the government. However, the case was thrown out on the grounds they were covered by parliamentary immunity. Their compensation claims over the destruction of their political careers was revealed by a Ministry of Justice representative. He would not say how much the three were demanding, but there have been reports that they want CZK 4 million each. Their arrests were part of a scandal that brought down the centre-right government of Civic Democrat PM Petr Nečas.
The Social Democrats, ANO and the Christian Democrats have reached agreement on a coalition deal. The document will be signed by party representatives on Thursday and made public the following day. The parties hammered out the deal late on Tuesday night after lengthy talks. On the issue of health fees, they have agreed to remove them for seeing a doctor but retain them for visits to accident and emergency. Regarding VAT, there will be a second lower rate covering medicines, books, nappies and children’s foods. The three parties are expected to focus on the division of portfolios next week when the leader of the Christian Democrats returns from an overseas trip.
The parties of the emerging coalition government are debating tax changes as of 2015. Social Democrat leader Bohuslav Sobotka told Czech Television on Sunday that the proposal currently being discussed envisaged three VAT rates as of 2015 – a standard rate and two lower rates with medicines falling into the lowest category. The fallout in state revenues would be compensated for by higher corporate taxes. Details of the emerging agreement are still to be finalized. The Social Democrats, ANO and the Christian Democrats say they have made significant progress on policy matters. A debate on the division of ministerial posts has been postponed until mid-December.
Trading firms’ obligation to check their business partners’ VAT records has won the Absurdity of the Year award, the organizers said on Thursday. The respective legislation, which came into force last year, was supposed to curb tax evasion. However, critics say the state in fact transferred its responsibility for tax collection onto private companies which have to make sure their business partners have paid the value added tax. If they fail to do so, the companies face the risk of themselves having to pay VAT for their business partners. The 7th annual Absurdity of the Year awards also highlighted the fact that the Czech authorities reject tax returns in the pdf format.