In Business News this Friday: City pays 2.7 billion owed over Blanka Tunnel; bank customers’ hopes further dashed by Supreme Court; passenger train operator slashes price on Prague-Žilina route;; construction firms still feeling brunt of 2008 financial crisis; annoying tourist gets in the face of friendly Slovak campers.
Economic confidence in the Czech Republic firmed slightly in April compared with March according to a survey by the Czech Statistics Office. The composite economic confidence index advanced by 0.2 percentage points to 92.6 points. Consumer confidence showed the biggest jump of 1.7 points to 98.4 points whereas business confidence slipped by 0.1 point to 91.5 points.
More than 300 Czech bookshops were on Wednesday offering 15 percent reductions on their prices as part of a campaign to cut Value Added Tax on books. The Association of Czech Book Sellers and Publishers has welcomed the government’s proposal to cut the current 15 percent VAT rate on books to 10 percent but says that it still believes that the right rate should be 5 percent. The association says a 10 percent rate would still leave the Czech sales tax on books higher than in most other European countries.
The Czech coalition parties have approved plans to cut the VAT rate on drugs, medicine, diapers and food for infants from 15 to 10 percent as of 2015. Prime Minister Bohuslav Sobotka said the Finance Ministry would now incorporate the move into the draft of next year’s state budget; it is estimated that the lower VAT rate would cost the budget several billion crowns. The Czech government is yet to discuss the plan with the European Commission; it will consider plans for further cuts of the VAT rate only after measures to improve VAT collection are implemented, according to the prime minister.
The Czech Finance Ministry’s plans to cut the two existing VAT rates by one percent to 20 and 14 percent, respectively, in 2016 have not been approved by the coalition parties and would have an disproportionate impact on the state budget, Prime Minister Bohuslav Sobotka has said. Mr Sobotka’s remarks came in a reaction to the daily Mladá fronta Dnes’ report on Wednesday detailing the plans. The Finance Ministry would also like to introduce a third, 10-percent VAT rate next year that would apply to drugs, books, and baby food; the prime minister said this was a reasonable compromise.
Czech consumers can look forward to having more change in their pockets after shopping trips if reported plans for the phase in of three levels of Value Added Tax come true. A preliminary document outlining the changes has already been drawn up by the finance ministry but still needs to be approved by the government by the end of the month.
The average mortgage interest rate dropped to a historic low of 2.93 percent in January, according to an index compiled by the Fincentrum advisory firm. It is the lowest average rate since 2003 when monitoring began. In March, nearly 8,300 clients took out new mortgages, which was around 2,500 more than in the previous month. The overall volume of new mortgages grew last month to 13.8 billion crowns, some 4.3 billion more than in February. The decrease in rates has been fueled by competition among banks, and could continue for months to come, an analyst for the Fincentrum firm said.
Squandering of public funds in ill-conceived investment projects has always been a big problem for Czech state administrations. Now the centre-left government is setting up a watchdog body which should assess the necessity for major investments and make sure that the money is spent according to plan.
Czech banking institutions, most of whom still observe the unpopular practice of charging fees for managing loan and mortgage accounts, can breathe a sigh of relief. In a closely watched case the Constitutional Court on Tuesday ruled that the practice of charging such fees is not illegal, dashing the hopes of tens of thousands of people who have signed up to class actions to try and get their money back.
The Ministry of Finance has to pay the Czech Syndicate of Journalists CZK 292 million as compensation for a new building the state failed to provide for the organisation. The Prague City Court on Tuesday upheld a ruling to that effect made a year ago by a district court. The ministry’s only avenue of appeal is to the Supreme Court. The dispute dates back to 1967 when the Czechoslovak Syndicate of Journalists transferred two buildings on Prague’s Wenceslas Sq. to the state; the site was used to build the Federal Assembly, while the state committed to providing a replacement building by Jirásek Bridge. It failed to do so and the second site is now home to The Dancing Building.