Czech MP demands change in government fiscal bill

...parliamentary vote next week, raising the threat the reform could fail.

The government has secured a one-vote majority for the reform with the help of two opposition deputies, but former Finance Minister Vlastimil Tlusty said he wanted a further change.

Tlusty, a dissident within the ruling Civic Democrat Party (ODS) who had already pushed through a number of changes to the draft, demands that the government alters tax write-offs in order to avoid a tax rise for some people in 2009 after a drop in 2008.

"Common sense shows that this is an issue that has no healthy reason behind it," Tlusty told Czech Radio.

"I cannot imagine anybody would defend anything so absurd. All that is needed is to fix the parameters of the first step (2008 change) so the change is gradual and to avoid a having a step down (in tax burden) followed by a step up," he said.

He said the ruling coalition had gone so far in an agreement on the reform that it would not be wise to dump the whole package because of a mistake that should be fixed.

However, the parliament has already finished second reading of the bill, and further changes are not possible unless the second reading is reopened.

Prime Minister Mirek Topolanek said on Czech Television he would talk to Tlusty about the issue but believed the reform would be approved.

The coalition has agreed to introduce a flat tax of 15 percent on personal income next year, eliminating current tax brackets of 12 to 32 percent.

In 2009, the tax should fall further to 12.5 percent.

But at the same time, tax deductions would drop in 2009, which would mean that some people may pay higher tax in 2009 than in 2008.

The lower house scheduled the next session on the reform bill for August 21, when a final vote may be held.

The government package cuts benefits to parents, sickpay and other handouts, and raises sales tax on food and other basic items as well as energy and cigarettes.

The corporate tax would fall to 21 percent next year from 24 percent, and eventually to 19 percent in 2010.

The government aims to cut the budget deficit to 3.2 percent of GDP in 2008 and, along with further measures to be introduced later, to 2.5 percent in 2010, from 4 percent seen this year.

[PRAGUE/Reuters/Finance.cz]