Czech leftists reject govt fiscal reform plans

...Wednesday, saying they would only help the rich while hurting the rest of Czech society.

The government, which holds exactly half the seats in parliament, faces a tough battle to push through a plan on Tuesday to revamp taxes and welfare, aimed at slashing the fiscal deficit to 2.3 percent of GDP by 2010 from 4 percent expected this year.

"These are reforms for high society, for the highest social class," party chief Jiri Paroubek said.

Paroubek and other party officials said only those making more than double the average wage would reap the benefits of the reforms, which the government sees as necessary to help put the Czechs back on track to adopt the euro currency.

"It will increase social differences," Paroubek said.

The government is proposing to unify personal tax rates of 12 to 32 percent at 15 percent, but calculated from a widened base. Tax progression would be kept by a flat tax abatement of 2,070 crowns per month.

Finance Ministry data showed high income earners would benefit the most, while middle classes would only see their tax bill decline marginally.

The government is also looking to gradually cut corporate income tax to 19 percent in 2010 from 24 percent.

The preferential value-added tax rate, slapped on selected items such as food, drugs, house construction and public transport, would rise to 9 percent from 5, raising living costs. The regular VAT rate would remain at 19 percent.

Social spending would be cut, mainly in the area of sick pay and parental benefits.

The government has just 100 seats in the 200-seat lower house of parliament and will need to rely on two former Social Democrat deputies who have quit the party faction and helped the government survive a confidence vote in January.

Neither of the two have spoken on their position on the tax reforms, although one has in the past held distinctively left-wing views.

Some members of the ruling coalition have also voiced dissatisfaction with the reform package, which is expected to land in parliament in June.

The government has said it would quit if the package fails.