RPT-FACTBOX-Key points of proposed Czech fiscal reforms

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The Czech Republic's centre-right government secured backing for its planned fiscal reforms on Wednesday after parties in the ruling coalition agreed on changes acceptable to all and two opposition deputies promised to vote along.

The government aims to cut the budget deficit, calculated under EU rules, to 2.5 percent in 2010 from 4 percent seen this year, through the reforms and additional measures.

The following are selected proposals included in the package, after changes introduced in final negotiations with dissenting backbenchers and the two leftist deputies who agreed to back the government which has just 100 votes in the 200-seat lower house.

Their help should be sufficient for the reform to sail through a vote seen on August 21 or later next week, although one coalition deputy has said he would not support the plan.

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INCOME TAXES:

- Flat 15 percent tax rate on all personal income from 2008 would replace the current progressive tax with brackets from 12 percent to 32 percent; the rate would fall further to 12.5 percent in 2009.

- Personal income tax base to be broadened to include social security and health insurance contributions paid both by employees and employers for their workers. The portion paid by employers now is 35 percent on top of gross wages. The 12.5 percent rate will be equal to about 19.4 percent if current tax base is used.

- 'Tax abatement', sum to be automatically deducted from taxes, will be raised to 24,840 crowns next year from 7,200 crowns, but will fall again to 16,560 as of 2009.

- Changes will mean savings for high earners and low earners.

- Corporate income tax rate to fall to 21 percent next year, 20 percent in 2009 and 19 percent in 2010 from 24 percent now.

- A cancellation of dividend, capital gains and property transfer taxes will be considered in the next reform stage for 2009 or 2010.

VALUE-ADDED TAX:

- Lower, preferential value-added tax (VAT) rate -- levied on essential items such as foodstuffs and medicine and other selected goods and services -- to rise to 9 percent from current 5 percent.

- Higher, base VAT rate to remain at 19 percent.

OTHER TAXES:

- Excise taxes on cigarettes will rise, and new environmental taxes will be levied on fuels.

HEALTH CARE AND SOCIAL TRANSFERS:

- Changes include cuts to parental contributions, child benefits, birth and funeral contributions and other welfare.

- Plan sees saving 8.5 billion on social benefits next year, savings should rise by 2010.

- Savings of 9.2 billion in sickness benefits next year.

- Automatic indexing of benefits should be abolished.

- Patients will pay a 30 crown fee for doctor visits.

- No sick pay for first 3 days of illness.

OVERALL SAVINGS:

Finance Minister Miroslav Kalousek said earlier this year the package would save 32 billion crowns in mandatory spending next year versus what would occur without reforms, and the cabinet would slash 15.5 bln in discretionary expenditure to cut the budget deficit to 3 pct/GDP next year under domestic methodology.

[Reuters/Finance.cz]