Billionaire Ignites Debate Over Who's Rich Before Czech Election

  • Babis vows to cut taxes for most Czechs, no change for wealthy
  • Czech citizens shouldn’t be penalized for success, Babis says

Czech billionaire Finance Minister Andrej Babis took aim against his governing partner, Prime Minister Bohuslav Sobotka, by challenging his proposal on how to tax the rich before fall elections.

Babis, whose ANO party leads opinion polls ahead of this fall’s parliamentary ballot, vowed to cut income tax for earners with monthly salaries of less than 113,000 koruna ($4,417) and keep levies for everyone else unchanged. The proposal is a riposte to one presented last week by Sobotka, who pledged to cut taxes for most Czechs and boost those for anyone making more than 50,000 koruna a month to a top bracket of 32 percent, calling it “a question of solidarity.”

Andrej Babis

Photographer: Martin Divisek/Bloomberg

The premier’s plan would increase the tax burden for top earners to more than 40 percent when health care and pension contributions are included. But the salary threshold for his top bracket, at about $2,000 a month, has sparked debate in the former communist country over how to define “rich” and represents a swing to the left by his Social Democratic Party. Czech income tax is now a flat rate of 15 percent, with a “solidarity” tax of 7 percent on any income that exceeds the annual average by 400 percent.

“I don’t think it’s a good idea, as proposed by the Social Democrats, to penalize people with income over 50,000 koruna” a month, Babis told the party congress, which re-elected him as chairman. He also rejected a plan by Sobotka to impose special taxes on certain industries after the prime minister pledged to raise taxes on companies making more than 100 million koruna in net income a year.

While their ruling coalition has survived longer than any of the previous eight Czech administrations in the past 15 years, Sobotka and Babis have clashed on a wide array of issues, including potential conflicts of interests among politicians who own businesses and the state’s role in the economy. Their squabbles have only increased as the chemical and agricultural tycoon’s lead in polls has widened.

The Czechs will vote this fall, following elections in Germany and France, as anti-establishment parties ride a global populist tide that has sown upheaval through the U.K.’s vote to leave the European Union and the rise to power of Donald Trump. Babis’s ANO, which has echoed the U.S. president by calling traditional political parties corrupt and ineffective, had 30 percent support among voters, versus half of that for Sobotka’s party, according to a Jan. 26 poll by Stem.

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