The interests of labor unions and business are not always aligned,
but the sweeping spending cuts and tax hikes put forward by the Finance
Ministry have united the two in fear this latest proposal signals the
government has fully embraced a procyclical fiscal policy - usually only
spotted in much less developed economies - that has been prowling new territory
in Europe since the crisis.
Facing a mounting budget deficit
estimated to reach 105 billion Kč ($5.6 billion/4.2 billion euros) this year,
economic ministers agreed to a proposal in late February that included several
suggestions for raising tax revenue, among them an increase to the standard
value-added tax rate to 20 percent, an additional hike of 1 percent to the flat
income tax, which is set to rise from 15 percent to 19 percent next year, and a
more progressive income tax for high earners that could see those earning more
than four times the national average taxed at 30 percent or higher. Other
suggestions include raising the tax on carbon credits and energy consumption
and imposing an excise duty on wine.
On the chopping block are
pensions, state maternity benefits and government jobs and wages, as well as
renewable energy subsidies.
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