RPT-Czech MP demands deeper tax cuts in govt reform

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By Jan Lopatka

An influential Czech right-wing member of parliament called on the government on Thursday to adopt deeper tax cuts under its plans to revamp fiscal policy and cut budget deficits.

Former Finance Minister Vlastimil Tlusty proposed his Civic Democratic Party (ODS), led by Prime Minister Mirek Topolanek, to cut both corporate and personal income taxes to a single level of 12 percent.

That would be a much more radical cut than rates of 19 and 15 percent respectively for firms and individuals proposed by the cabinet.

Personal income tax rates in the central European EU member country now range from 12 to 32 percent, while companies pay 24 percent.

Tlusty had repeatedly said the government must change its reform plans to win his vote for its reforms in parliament. Tlusty's opinion may be key, because the three-party coalition cabinet controls just 100 seats in the lower house of parliament.

Tlusty said his party had given in too much to coalition partners -- the centrist Greens and the Christian Democrats -- when negotiating the reform package.

"I understand that the ODS must delay parts of its agenda," Tlusty told a party conference. "But I cannot imagine that other parts would be destroyed or discredited," he said.

Tlusty also proposed to cut the standard value-added tax rate to 17 percent from 19 percent.

He said his proposals would be financed by lower tax leaks and the removal of 90 percent of various tax breaks provided by current law.

Prime Minister Topolanek responded by saying the proposals were good but he had to look at what is acceptable for the coalition partners. He said the ideas would be discussed further, but only at a latter stage of the reforms.

The cabinet plans to submit the initial reform package to parliament in June.

The reform also includes limits on wage hikes in the public sector and cuts in both social and discretionary spending, in order to cut the budget deficit to 3 percent of gross domestic product next year and 2.3 percent in 2010, from 4 percent forecast this year.

The government has repeatedly said it would try to provoke an early election in case its reforms are defeated in parliament.

Keywords: CZECH TAXES/

[PRAGUE/Reuters/Finance.cz]