24-07-2003

President vetoes VAT law

The president has vetoed a law that would have raised the value added tax on some goods and services by 17 percent. The change, previously approved by Parliament, is part of the government's fiscal reforms and is also required by the European Union. The veto means the lower house of parliament will have to take another vote on the law. Under the law, some goods and services would be moved from the lowered 5 percent rate to the standard 22 percent rate because the EU only allows lower tax on a limited range of items. However, EU member states are able to set the tax brackets individually. Value-added tax in the European Union ranges from 15 in Luxembourg to 25 in Sweden and Denmark. The VAT change would affect many services such as telecommunications and construction as well as some environmentally friendly products. Critics pointed to the shortfalls of the change and its negative impacts on the business environment. The government had said the law would raise budget revenues and help cut the widening budget deficit.

Aero to fly on

The Czech government decided on Monday to keep indebted aircraft maker Aero Vodochody afloat and said it would consider privatising the troubled company, in which the U.S. company Boeing holds a 35-percent stake. The government agreed to prolong guarantees for a 300-million-dollar loan to Aero, a condition that must be met for the company to avoid defaulting on its debt. The cabinet also asked relevant ministries to submit by the end of September a proposal for future steps with the state stake in Aero. By approving the guarantees of the company, which has negative equity, the government is showing that it hopes the company will succeed in exporting its L-159 multi-purpose subsonic jets.

After the collapse of its former east bloc market, Aero has started to challenge major arms exporters for deals in areas such as India, Kenya, the Middle East and South America. It is also eyeing markets in the Philippines, South America and the Gulf. Aero returned to the black in 2001, when it posted a net profit of almost 700 million crowns on sales of 12 billion. It has not released 2002 results but the company has said it expects a net profit of around 900 million crowns and has been hiring new employees.

Radiokomunikace buyout offer delayed indefinitely

The majority shareholder of the Czech Republic's second largest telecommunications group Ceske Radiokomunikace indefinitely delayed a public buyout offer to minority shareholders. The stock skidded 6.4 percent on the news, retreating from a one-year peak it hit last week. A consortium of Danish operator TDC and Deutsche Bank called Bivideon holds 72 percent in Radiokomunikace. Analysts say Bivideon would like to delist Radiokomunikace. Under Czech law, it must offer to buy out the minority stake which is valued by the market at around 80 million USD.

24-07-2003