* Budget gap to be proposed at CZK 230 bln
* Could be cut to CZK 160 bln if taxes raised, spending cut
* Fin Min to propose value added tax hike worth CZK 20 bln
* Inflation, jobless to rise in 2010 if measures adopted
* Sees no need to change 2009 GDP forecast
By Martin Dokoupil
PRAGUE, Aug 16 (Reuters) - The Czech central state budget is
likely to be proposed with a deficit of 230 billion crowns
($12.76 billion) for next year if legislation does not change,
Finance Minister Eduard Janota told a TV station on Sunday.
The Czech Republic, like other states in central Europe, has
been struggling to rein in a widening budget gap as its
export-driven economy has dived into its deepest recession since
the early 1990s due to slowing demand in western Europe.
"The state budget will be submitted in line with valid
legislation. If nothing fundamental happens it will probably be
submitted with a deficit of roughly 230 billion to the Chamber
of Deputies at the end of September," Janota told Czech TV.
This would mean a public finance gap of 7 percent of gross
domestic product next year, Janota said, adding Saturday's
report about the budget shortfall of 256 billion crowns was a
misunderstanding. []
He said the state budget deficit, which is a key part of
public finances, could be slashed to roughly 160 billion crowns
next year, or 5 percent of GDP, below the planned 170 billion,
if taxes are raised and mandatory spending trimmed.
The central bank sees the fiscal shortfall swelling to 6.4
percent of GDP in 2010 from 5.1 percent this year, above a euro
adoption limit of 3 percent. The gap was 1.5 percent in 2008.
[]
The government is due to discuss Janota's proposals on how
to keep the budget deficit under control on Aug. 24.
"There will be a very hot debate. It is very political,"
Janota said.
VAT HIKE
The proposal will include a hike to both value added tax
rates to 11 percent from 9 percent and to 20 percent from 19
percent, which could bring some 20 billion crowns, Janota said.
Janota also plans overall spending cuts worth 40 billion
crowns with mandatory spending accounting for 30 or 37 billion.
Mandatory spending such as pensions and welfare is a hot
issue ahead of the early general election on October 9-10. It
accounts for 80 percent of the overall budget spending.
The ministry also plans to delay the reduction of corporate
taxes to 19 percent from 20 percent and raise social insurance
caps.
Janota said the proposed measures would boost inflation by 1
percentage point next year, while unemployment would rise by 0.4
percent. The ministry's July forecast sees average inflation at
1.1 percent next year and jobless rate at 8.5 percent.
The ministry also has no reason to change its forecast for a
record 4.3 percent economic fall this year after surprising
second quarter GDP data, Janota said, adding the third quarter
would be decisive. []
($1=18.02 Czech Crown)
(Reporting by Martin Dokoupil; Editing by Jon Loades-Carter)
