RPT-Czechs mull single 15 pct personal tax rate-report

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PRAGUE (Reuters) - The Czech Finance Ministry plans to propose a cut in personal and income taxes, to be offset by a higher sales tax, as part of a package of measures overhauling public finances, a newspaper reported on Saturday.

The biggest mainstream daily Mlada fronta Dnes quoted a ministry proposal as calling for a single 15 percent personal income tax rate to replace the current four-bracket progressive tax scheme from next year.

The corporate income tax rate should gradually fall to 19 percent by 2010 from 24 percent now, but a lower number of exemptions would counterbalance the budget impact, it added.

But ministry spokesman Ondrej Jakob said the ministry had yet to finalise a plan for tax changes. "This is one of many working proposals," he said.

The report said the personal-income tax cut would shave 16 billion crowns off budget revenues, but the government would aim to raise an extra 25 billion crowns through a rise in the lower value-added tax (VAT) bracket.

It reiterated earlier media reports that the preferential lower VAT rate -- levied on foodstuffs and selected goods and services -- was to rise to 9 percent from 5 percent. The higher, base VAT rate would remain at 19 percent.

Finance Minister Miroslav Kalousek has said he would propose changing VAT and corporate and personal income tax rates as part of a fiscal overhaul aimed at cutting the public finance deficit to about 3 percent of gross domestic product (GDP) in 2008.

The government plans to present fiscal proposals in early April, including plans to revamp a number of social benefits and other government handouts to cut social spending which swelled by an equivalent of nearly 2 percent of GDP this year.

Both tax and spending proposals require parliamentary approval, which the centre-right coalition government will be struggling to secure as it lacks a majority.