The Czech government has withstood a recent crisis, after an agreement between coalition members was reached just after the Easter holiday. Failure to deal with the internal wrangling, brought about by demands by the smallest member of the coalition, Public Affairs, for changes to the coalition’s priorities and the abolishing of certain ministries. Its three ministers had threatened to resign their posts, the result of which would have been early elections in June. Having sheathed their political knives after a series of back-room negotiations, the coalition then came out with a major tax increase that will need to win approval in Parliament. The government is now proposing an increase in the VAT rates by one percent, to 15 and 21 percent, as of January 2013. Income tax would rise one percent to 20 percent, with those earning over CZK 100,000 per month being called to add 7 percent as a solidarity contribution. At the same time, pension increases are set to fall, while university students would have to start paying tuition fees of around CZK 3,000 per semester. The changes should add approximately CZK26bn to the state budget next year, CZK 45bn in 2014 and CZK58bn in 2015.
