Prague - Just in a few days VAT paying entrepreneurs in the Czech Republic may be able to apply a value-added tax write-off for the purchase of new cars.

The new bill introducing a set of measures to boost the Czech floundering car industry was approved by Senators Thursday and signed by President Klaus on Friday.

It was proposed by the National Economic Council of the Government (Národní ekonomická rada vlády - NERV) that was established in January this year to steer the country through the stormy waters of the crunch.

The measure is aimed at lowering costs of the purchase of new cars for businessmen and business license holders. At the moment the car VAT is 19 percent. The new measure will apply to a purchase of older cars as long as the buyer is a VAT payer.

Bypassing the law

Up until last week companies could use VAT write-off only for cars in which the cargo space was separated from the passenger seat. However, Czech enterpreneurs learned how to bypass the law and put a fence in their passenger cars to pay a lower VAT.

The VAT write-off for the purchase of new cars has been sharply criticized by the Social Democrats.

They argue that it helps only "rich businessmen", and not the poor. Instead, they have been trying to promote a government subsidy bonus for drivers who turn in old cars and buy a new model.

A similar measure was introduced by Germany and Slovakia.

The German government gave EUR 2,500 to drivers who turned in cars over nine years old and purchased new models with lower emissions. At the moment Germany is mulling an extension of this incentive, as it helped revive the country's car industry.