(Refiles to correct day of week in first paragraph)
* Pension reform key in forming new government
* Mandatory private savings, lower social tax, higher VAT
* Left rejects the plan
By Jana Mlcochova and Roman Gazdik
PRAGUE, June 9 (Reuters) - An expert panel proposed a
radical overhaul of the Czech pension system on Wednesday,
handing a ready-made plan to politicians who will need to give
pension reform priority.
The three centre-right parties likely to form the next
cabinet after a May 28-29 election welcomed the plan, drafted by
private and public sector economists working under the auspices
of the finance and social affairs ministries.
The Czech Republic is the only country in central Europe
that has not yet reformed an increasingly costly pay-as-you-go
system, which puts pressure on the budget as the population ages
and fewer people work due to demographic trends.
"The best time to reform pensions is already gone," said
Vladimir Bezdek, head of the expert commission.
The commission agreed to introduce a compulsory pension
savings scheme to complement the current system in which wage
earners pay the state which distributes money directly to
current pensioners.
The savings would be managed by private pension funds.
A third voluntary pillar of additional private savings,
which is already in place, would be preserved.
The social tax rate would be cut to 23 percent of gross
wages from 28 percent, which would lower labour costs and raise
people's income.
Out of the 23 percent, 3 percent would go to the compulsory
additional saving scheme and 20 would continue to go into the
pay-as-you go system.
The ceiling for payments of the social tax would be cut to 3
times the average wage, from 6 times the average.
The shortfall -- in dozens of billions of crowns per year --
coming from the lower rate would be financed from unifying two
current value added tax rates of 10 percent and 20 percent, at
19 percent, and by delaying the retirement age.
PARTIES YET TO AGREE
The central European country may get the strongest and most
reform-minded government since the early 1990s if the right-wing
Civic Democrats, the conservative TOP09 and the centrist Public
Affairs make a deal.
Civic Democrat leader and the likely next Prime Minister,
Petr Necas, backed the plan.
"We would eventually be prepared to support it as it was
written but of course we have to lead political talks on that,"
Necas told reporters.
TOP09 deputy chairman Miroslav Kalousek said the party had
yet to debate the proposals but he liked them, and Public
Affairs leader Radek John said there was a "relatively high
level of agreement".
Politicians and experts say the reform should be agreed by a
strong majority, including the leftist opposition, because the
new system needs to last for decades.
The leading leftist party, the Social Democrats, rejected
the plan. But the centre-right coalition would have 118 seats in
the 200-seat parliament and may do it alone.
The state pension account showed a deficit of 1 percent of
gross domestic product last year and Bezdek said that without
reform it is likely to remain in deficit.
The overall public finance deficit was 5.9 percent, and this
year's government target is 5.3 percent.
(Editing by Ruth Pitchford)
