Petr Dubinsky

Zeman Caves On Tax Cuts

On Monday, President Miloš Zeman returned the tax package without signing to the House’s Speaker, Radek Vondráček. The president has previously said that he will not veto the law allowing it to take effect. For this to happen from the beginning of January, it must be published in the Collection of Laws by the end of the year. Before that, it must be signed by Prime Minister Andrej Babiš, and then it will be given to the Ministry of the Interior for publication in the collection. 

Zeman wrote to Vondráček that he decided not to attach a signature to the law. He does not like the fact that the tax change can “deepen the unfavorable development of public finances, especially the state budget.

As one of the main changes, the tax package brings the abolition of the so-called super-gross wage. This means that the basis of the employee income tax has been the gross wage increased by the employer’s contributions to compulsory insurance premiums since 2008. Newly, the basis will be only the gross wage and will be subject to a rate of 15 percent. Only for people with monthly incomes of approximately 141,000 crowns will the rate of 23 percent apply to this part of the income.

The original version, approved by the Chamber of Deputies in November, meant a shortfall in tax revenues of public budgets of approximately 130 billion crowns. The state budget accounted for a shortfall of about 88 billion crowns. The Chamber of Deputies adopted the Senate version of the package, which will mean a revenue loss for the state budget of 87.5 billion crowns. The approved state budget does not take this into account.

The package also introduces one of the main changes, the so-called meal voucher package, which will serve as an alternative to classic meal vouchers. It increases the basic tax rebate per taxpayer in the next two years, always by CZK 3,000, and increases the excise duty on tobacco products.

The law is to enter into force on the first day of the calendar month following its promulgation, but not before 1 January of the following year. The Ministry of Finance has previously stated that abolishing the super-gross wage and the tax rebate increase will be effective throughout the next year.

According to the Ministry of Finance, if the law came out in January, the meal voucher flat rate would not come into force until February. Which means that it would not be possible to provide it to employees in January/

However, according to the TOP 09 parliamentary group and former finance minister Miroslav Kalousek, the president will cause trouble with his move. “Which is right, the president is right. However, his decision will only make the law effective later than 1 January, which will cause several problems. So it will do much more harm than good,” Kalousek said on his Twitter account.