PRAGUE — Czech Finance Minister Zbynek Stanjura wants to overhaul the value-added tax system, raising VAT on some items including hotels, water, beer and heating, as the country seeks to lower its budget deficit, state TV reported.
The reforms, which Czech Television called the biggest in eight years, would combine the current two lower VAT rates of 10% and 15% under a 14% rate, while maintaining the top level of 21%, it reported.
The changes could raise 24 billion crowns ($1.12 billion) for the budget next year, it said in a Monday evening report, which included some direct comments from the minister.
The finance ministry did not reply to a request for comment. Prime Minister Petr Fiala said on Tuesday that plans published in the media were not final.
“I will personally announce final proposals on the topic of lowering the budget deficits (resulting) from expert and political debates in about a month,” Fiala said.
“Our coalition wants to look for potential savings primarily on the side of the state and only after that in people’s pockets.”
Czech TV reported that under the changes, which still face debate in the five-party, center-right coalition government, services like lodging, water, sport and cultural activities that are currently taxed at lower rates would move into the 21% bracket.
The government is looking for around 70 billion crowns in budget savings or indirect tax increases to cut next year’s deficit from a planned 295 billion crown gap this year, seeking to do its part to quell inflation running above 16%.
Stanjura told Czech TV that tax items would be judged on whether “there is a societal reason to consume more of these services.”
“All others are up for debate,” he said. Stanjura aims to have tax legislation in parliament by June.
The government took power at the end of 2021 aiming to rein in debt levels that remain well below European Union averages but have grown in recent years at one of the fastest rates in the bloc.
But higher spending needs due to Russia’s invasion of Ukraine and state aid necessary to ease the impact of soaring energy costs on households and firms have hit its plans.
The central state budget gap should fall by 65 billion crowns in 2023, although the overall fiscal gap is expected to rise to 4.2% of gross domestic product, remaining above EU rules, according to ministry forecasts.
($1 = 21.4930 Czech crowns) (Reporting by Jason Hovet and Jan Lopatka; Editing by Nick Macfie, Angus MacSwan and Jan Harvey)
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