Business News

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In this week’s business news: the government moves to shift the burden from direct to indirect taxation, Standard & Poor’s raises Czech sovereign ratings, Trade and Industry Ministry statistics reveal a drop in FDI and the Czech Mint reports a surge of interest in investment gold.

Government approves package of tax reform measures

A package of tax reform measures approved by the Czech government on Wednesday aims to simplify the tax system and shift the tax burden from direct to indirect taxes. The tax reform should abolish the so-called “super-gross salary” that includes both normal pay and insurance payments and is currently taxed by 15 percent, and replace it with a 19 percent tax on salaries. It should further levy a single 20 percent tax on gambling and exclude small shareholders from paying tax on dividends. One of the most sensitive points of the proposed reform is the removal of tax breaks on some employees’ benefits such as lunch vouchers, over which parties are expected to clash in the lower house. The Finance Ministry says the reform is fiscally neutral and should result in Czechs paying more or less the same amount in taxes.

Standard & Poor’s raises Czech sovereign ratings

Photo: Štěpánka Budková
Standard & Poor’s this week raised its evaluation of the Czech Republic for long-term foreign currency obligations two levels from A to AA-. At the same time the agency raised its rating of the Czech state’s long-term obligations in the domestic currency by one level from A+ to AA-. The news had an immediate impact on the financial market with the Prague Stock Exchange’s PX Index rising sharply following the announcement and the crown strengthening.

OPAL Natural gas pipeline completed

The connection has been completed between a major gas pipeline running through Germany to the Czech border and the pipeline bringing Russian gas from Siberia, the companies behind the two ventures announced on Thursday. The link between the Nord Stream pipeline and the OPAL pipeline running 470 kilometres from the Baltic coast down the eastern German border to Olbernau on the German-Czech border is part of a strategic effort to diversify Russian gas export routes and avoid transit problems in the Ukraine and Belarus. A Czech pipeline, GAZELLE, is being constructed by the local gas unit of Germany’s RWE, Net4Gas, to link up with the OPAL pipeline with the aim of talking the gas further south. The GAZELLE link should be completed by the end of the year, the deadline by which Nord Stream should become operational.

Czech Export Bank approves loan to Ukraine’s Energoatom

Zaporizhia nuclear power plant
The state-owned Czech Export Bank (ČEB) has agreed to loan the Ukrainian state-owned operator of the country’s nuclear power plants Energoatom 780 million crowns – over 43 million US dollars, the Russian energy news server pronedra.ru reported on Tuesday. The money will reportedly be used to acquire nuclear fuel storage facilities for the fifth reactor block of the six-reactor Zaporizhia nuclear power plant on the Dnieper River in the south of the country. Details of the loan have not been made public.

Entrepreneurs cautious: drop in new businesses, FDI down

Photo: Štěpánka Budková
The number of new companies formed in the Czech Republic in the first half of 2011 was down 3.5 percent year on year, according to data published by the Czech Capital Information Agency (ČEKIA). Statistics from the Trade and Industry Ministry also indicate that conditions for business in the Czech Republic have worsened with the inflow of foreign direct investment having slowed 67 percent year on year to 17.4 billion crowns (1 billion US dollars) in the first quarter of the year. Business analysts ascribe this to the changing legislative environment, permanent government crises and corruption scandals as well as debt problems in the European Union and in the United States.

Surge of interest in investment gold

The Czech Mint reports unprecedented interest in investment gold, saying it had sold close to 100 million crowns worth of gold last week. The reason behind the heightened interest is the price of gold on world markets and the volatility of stock markets. The mint reported a record order from an individual this week for 10 kilos worth of gold worth around 10 million crowns. There has also been a surge in demand for gold coins.