* Will raise sales tax less than planned next year
* Will unify VAT at 17.5 pct from 2013, lower than planned
* Scraps plan to lower employers' social tax contribution
(Adds quote, more details)
By Roman Gazdik
PRAGUE, March 10 (Reuters) - The Czech ruling coalition
parties scaled back a plan to hike the sales tax on Thursday,
yielding to public outcry the centre-right cabinet was using the
pretext of pension reforms for a hefty grab for people's money.
Prime Minister Petr Necas said the coalition agreed to raise
the lower value-added tax rate to 14 percent in 2012 from 10
percent, instead of unifying it with the top 20 percent rate and
thus giving up about 1.3 billion euros in revenue next year.
The original tax hike was part of the government's key plan
to reform the pension system to address ageing of the central
European country's population, and to cut the budget deficit to
zero by 2016. []
But the plan, which would raise taxes on a range of items
including books and medicines, came under criticism from the
public, unions, the left-wing opposition and President Vaclav
Klaus, while a junior coalition member pushed for a softening
from the impact the higher VAT would have on the poor.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
> Few takers, low savings a risk for Czech plan []
> FACTBOX-Main points of reform plan []
> Graphics on the demographics http://r.reuters.com/qat28r
> Graphics on pension spending http://r.reuters.com/pat28r
> Graphics on pension fund assets http://r.reuters.com/jad38r
> Graphics on Czech pension assets http://r.reuters.com/den48r
> Graphics on pension fund returns http://r.reuters.com/gup48r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> Under the plan agreed on Thursday, both tax rates will be
unified at 17.5 percent from 2013 onwards, Necas told a news
conference.
"Without exemptions, there will be only one value-added tax
rate," he said.
Necas said the changes to VAT would bring around 26 billion
to 27 billion in revenue in 2012, and around 22-23 billion from
2013 onward -- much less than the estimated 58 billion the
original plan counted on bringing in.
To help cut the shortfall, the government will scrap plans
to lower employers' contribution to the social tax, which it had
estimated would cost 20 billion crowns.
The government will also look to save on milder hikes in
pensions and lower tax rebates for families than planned, thanks
to the smaller impact on prices from the tax hike.
Necas also said the government will have to find 4 billion
crowns in savings in the budget in 2013.
Labour Minister Jaromir Drabek estimated the tax changes
would have a less than 1 percentage point impact on inflation
next year.
PENSION REFORM CONTINUES
As part of pension reform, the coalition plans to introduce
the option of allowing taxpayers to divert 3 percentage points
of the 28 percent social tax into private savings and away from
the pay-as-you-go system that uses current tax receipts to pay
retirees.
People who join the scheme, which is yet to be finalised and
is expected to cost the state 20 billion crowns per year in lost
tax, would also have to contribute 2 percent from their net
salary.
The government is counting on half the workforce to use the
so-called opt-out, a target that many analysts have called too
ambitious.
(Writing by Jason Hovet/Jan Lopatka, editing by Toby Chopra)
