Czech Government Plans Spending Freeze to Meet 2012 Deficit

The Czech government will propose a package of tax increases and spending freezes to ensure it meets its goal of reducing the size of the budget deficit in 2012, Finance Minister Miroslav Kalousek said.

The three-party coalition government may propose as much as 23.6 billion koruna ($1.2 billion) in spending freezes to ensure the state meets its plan to reduce the deficit in 2012 as economic growth slows, Kalousek told reporters today in Prague.

The government must save 42.2 billion koruna next year and 84.4 billion koruna in 2014, Kalousek said. New laws will be introduced to curb the size of the deficit and the government will propose freezing increases in pensions from 2013 until 2015, he said.

The government also plans to cancel some social benefits, cut administration costs and making 20 percent the level of value-added tax on most goods, Kalousek said.

The electricity tax would also be doubled, while the government will introduce a carbon tax on heating oil and coal, the minister said.

The personal income tax will raise to 16 percent from 15 percent and the Cabinet wants to introduce a temporary 31 percent tax on top earnings that would be raised to 32 percent in 2014 and 2015, he said.

The government also proposes to lower deductible items for the self-employed.

To contact the reporter on this story: Krystof Chamonikolas in Prague at

To contact the editor responsible for this story: Gavin Serkin at

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