President Pavel To Sign Austerity Package Into Law

The package is designed to cut state spending by up to CZK 150 billion over the next two years. Credit: Freepik.

Prague, Nov 22 (CTK) – Czech President Petr Pavel has decided to sign the government’s austerity budget package into law today, he said in a video posted to Twitter. The package is designed to cut state spending by up to CZK 150 billion over the next two years.

“Because of the unsustainable growth of the Czech Republic’s debt burden, I have decided to sign today a package of government measures to bring us closer to stabilising the public finances and reducing the national debt. Failure to approve it would mean doing nothing at all to reduce our budget deficit, and that would do much more damage,” Pavel said.

The president also said he would pay close attention to the contents of next year’s state budget to ensure that it included pro-growth measures, and that he had not forgotten those who would be most affected by the austerity measures.

After his signature, the package will be published in the Collection of Laws. Most of the changes are set to come into force on 1 January 2024.

The package, proposed by the coalition government of Petr Fiala (ODS), mainly removes tax exemptions.

The opposition has criticised the package, saying it only increases taxes. ANO’s parliamentary group leader Alena Schillerova said on Tuesday that if the President did not veto the package, ANO would almost certainly challenge it at the Constitutional Court.

The package introduces a simplified VAT rate of 12 and 21%, increases corporate income tax rate from 19 to 21%, and property tax by an average of 80%. It also raises excise duty on alcohol by 10% over the next two years, and by a further 5% in the following year.

The package is intended to help the government consolidate the public finances and reduce the structural deficit of the state budget. Fiala previously described the rate of growth of the state’s debt as a threat to the economy. Finance Minister Zbynek Stanjura (ODS) has repeatedly argued that the Czech public finances are not in good shape and need to be consolidated.

The government presented its budget consolidation plan in May. In late June, it submitted the austerity package to the Chamber of Deputies, which approved it on 13 October.

The lower house debate was accompanied by many hours of speeches by opposition MPs. In response, the government coalition pushed for an end to the debate and a fixed vote at that time, which triggered complaints from ANO, and is one of the reasons why the opposition wants to appeal to the Constitutional Court over the package.

Stanjura dismissed the view that a catastrophe is imminent as a result of the adoption of the package. Fiala said the package is for the benefit of citizens and companies and will also allow the acceleration of key strategic investments.

Stanjura previously stated that the cabinet would not prepare another package. In the coming years, he wants to review ministerial agendas, focus on digitalisation and also look for savings in operational and staff costs and in national subsidies.

The package and adjustments to the pension system were previously welcomed by the Czech Fiscal Council. The tax rise will fall more heavily on employees than on sole traders, according to the experts.

Unions, on the other hand, are strongly opposed to the package, and many of them will join a broad-based strike next Monday, organised by the CMKOS umbrella organisation of unions.

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