Prague - Czech voters head to polls today and tomorrow, many of them worried about the struggling economy. Most major political parties that run in the early general elections promise to abandon unpopular austerity measures and, instead, to cut taxes or even abolish some of them.
The Communist Party (KSCM), the Czech Social Democratic Party (CSSD) and the populist ANO 2011 movement promise to cut the VAT rate, currently at 15 percent. The CSSD is widely expected to win the election, while the KSCM and Czech political newbie ANO 2011, led by billionaire Andrej Babis, will probably fight for the second place spot, according to latest opinion polls.
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Conservative TOP 09 wants to abolish the inheritance tax while the Civic Democratic Party (ODS) promises to scrap the real estate transfer tax. These two parties formed the Czech center-right government of Petr Necas from 2010 to 2013, which raised the VAT rate.
The same government managed to cut the Czech budget deficit to CZK 100 billion (EUR 3.9 billion), but only at the cost of decreasing government expenses. State investments will drop below CZK 100 billion this year, for the first time since 2006.
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This drop in government expenditures will be offset by increasing EU subsidies, whose volume will reach CZK 120 billion in 2014. EU aid to the Czech Republic will start to drop again in 2016 at the latest though.
The main burden to the Czech state budget are pensions and other welfare benefits. In order to be able to finance these expenses, the two main left-wing parties, CSSD and KSCM, propose to increase taxes for rich managers and big businesses.
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Other major parties are against any further tax hikes. "It is important that the tax burden does not increase," said ANO 2011. "At this moment we do not consider any rate changes necessary," says the ODS platform. Also TOP 09 vows not to allow any more tax hikes.
Instead of raising tax rates, these parties plan to make tax collection more strict and effective, especially in the case of VAT, and to fight tax dodging. For this reason, ANO 2011 wants to increase staff at state financial offices.
