The Czech Parliament will decide today on whether to increase both of the country’s VAT rates by 1 percent to 21 and 15 percent. The change would take effect next year. While prime minister Petr Nečas (ODS) insists the hike is essential to cut the budget gap, Czech president Václav Klaus claims it will further depress demand in the midst of a recession.
The vote will be vital for the center right government, as Nečas says his cabinet might quit if the plan is rejected. The tax proposal has stirred protests even from some of the MPs from his own party, weakening the position of the coalition which needs each of its votes if it’s to push the proposal through. The president’s intervention will not have helped the government’s cause. Nečas’s plan is aimed at decreasing the budget gap to below 3 percent from its current perch at 3.2 percent.
