Czech Cabinet Approves Budget Draft Assuming Tax Increase

The Czech government approved the 2013 budget draft, endorsing a deficit-reduction plan that assumes tax increases opposed by some lawmakers in Premier Petr Necas’s party.

The draft sets the ceiling for the public-finance deficit at 2.9 percent of economic output, compared with 3.2 percent expected this year, Premier Petr Necas told reporters in Prague today.

The government suffered a loss in the lower house of parliament on Sept. 5 when it failed to secure enough votes to push through a bill to raise taxes. Six lawmakers from Necas’s Civic Democratic Party joined the opposition and rejected the set of measures proposed to reduce the deficit, saying they are against a plan to boost revenue with higher taxes.

The Cabinet submitted the legislation to Parliament again, saying it is needed to cut the fiscal shortfall to less than the European Union’s limit of 3 percent of gross domestic product next year and linked approval of the bill to a vote of confidence.

Necas, who lost his parliamentary majority in April amid personnel and budget rows, credits previous austerity measures with helping reduce borrowing costs and says the new package, which includes higher sales taxes and a new levy on the highest incomes, will maintain investor confidence.

The two-year-old Cabinet has cut investment, raised the sales tax and curbed spending on public wages. The budget shortfall narrowed to 3.1 percent of GDP last year, from 4.8 percent in 2010.

To contact the reporter on this story: Peter Laca in Prague at placa@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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