FACTBOX-Czech govt plans to unveil fiscal overhaul in April

...measures to cut the budget deficit towards 3 percent of GDP in 2008 from 4 percent expected this year.

Topolanek told a newspaper on Monday [ID:nL26490240] that his government planned to introduce a flat personal income tax and "fundamental" changes to social spending to prevent the 2008 state budget deficit doubling to 180 billion crowns ($8.54 billion) from this year's target level.

The following are selected proposals which have been floated by officials, as reported by Czech media:

INCOME TAXES:

- Topolanek told the business newspaper the government plans a flat 15 percent tax rate on all personal income to replace the current four-bracket progressive tax scheme from 2008;

- social security contributions paid by both employees and employers for their workers to be included in the personal income tax base;

- personal income tax deductions and breaks to be revamped with the aim of making the flat tax regime beneficial to both low- and high-income earners;

- corporate income tax rate to gradually fall to 19 percent by 2010 from 24 percent now;

- lower the number of corporate tax exemptions to counterbalance the impact of the reduced tax rate on the budget;

VALUE-ADDED TAX:

- The lower, preferential value-added tax (VAT) rate bracket -- levied on foodstuffs and selected goods and services -- to rise to 9 percent from current 5 percent [ID:nL17647670];

- the higher, base VAT rate to remain at 19 percent.

SOCIAL TRANSFERS

- Press reports say 2008 budget to aim to save 22.8 billion crowns by cutting spending on welfare benefits and sickness insurance [ID:nL20721636];

- The plan is to cut expenditure on maternity benefit by 7.6 billion crowns and on sickness insurance by about 6.5 billion, shave nearly 2 billion off child benefits, and save additional money on parental contributions;

- Deputy Prime Minister Petr Necas told Reuters the 2008 budget should revoke a part of a highly controversial boost to social spending approved by parliament before last year's elections [ID:nL20142891];

- He said automatic benefits indexation would be abolished;

- Pre-election legislation boosted social transfers by 36.2 billion crowns, or 1.1 percent of GDP, this year and by 49.3 billion or 1.3 percent of GDP in 2008.

($1=21.08 Czech Crown)

Keywords: CZECH BUDGET/