Coalition Agrees On Amendments To Budget Consolidation Package

The agreed amendments are fiscally neutral, with no impact on the scope of budget consolidation. Credit: Freepik.

Prague, Aug 24 (CTK) – The Czech government coalition parties have agreed on several adjustments to the draft budget consolidation package, PM Petr Fiala announced, following the end of late negotiations shortly after midnight this morning. He said that the agreed amendments are fiscally neutral, with no impact on the scope of budget consolidation.

The tax advantage of employee benefits will be preserved, limited to half of the average wage from the previous period. Both employers and trade unions demanded the preservation of this tax advantage.

The coalition also agreed on one change to the value added tax (VAT) system compared to the original proposal. The VAT rate for magazines and newspapers will be unified at 12%, Finance Minister Zbynek Stanjura (ODS) said. Originally, the government had proposed a 21% VAT for newspapers.

In another change, 100% of property tax revenue will now remain with municipalities, in exchange for a CZK 10 billion reduction in the shared tax revenue.

The state will also receive 55% of gambling tax revenue instead of the current 35%. Municipalities will retain 22.5% based on the number of slot machines permitted, with the same proportion going to municipalities based on population, the parties agreed.

From January 2024, companies will be able to keep their accounts in a foreign currency, namely euros, dollars and pounds, if this is their functional currency.

Fiala (ODS) said that there was full agreement among the coalition parties on the procedure for further discussion of the budget in parliament. The coalition is composed of ODS, the Christian Democrats (KDU-CSL), TOP 09, the Mayors and Independents (STAN) and the Pirates .

A thorough list of the agreed changes will be released by the Finance Ministry later today, Fiala said.

The previously disputed tax exemption on income from beekeeping will remain unchanged.

The new excise tax on electronic cigarettes and nicotine sachets will not be as high as originally proposed. However, the gradual increase of excise tax on alcohol will be accelerated compared to the original proposal. The coalition originally proposed a 10% increase for next year and 5% for the following three years. It will now propose to increase the tax by 10% in each of the next two years and 5% in the following year.

The coalition now wants to discuss the joint amendments at a meeting of the lower house budget committee. If the committee approves this, it will be treated as a proposal of the committee, not of individual MPs, in the subsequent legislative process, Stanjura said.

The government said in May that the proposed budget consolidation measures should improve the state budget balance by CZK 97.7 billion next year, and save up to CZK 150.7 billion over 2024 and 2025. In its original form, the package amended 63 laws, mainly by abolishing and simplifying tax exemptions.

The cabinet wants to approve the package by the end of the year so that it can come into force next year.

As such, the bill is expected to bring the state an extra CZK 35.2 billion next year. In 2025, when the increased corporate tax rate comes into force, state revenues are expected to rise by CZK 37.1 billion. Thus, the bill under discussion does not include the planned cuts in subsidies and reductions in state spending, which are expected to cover about half of the planned budget savings.


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