PRAGUE (Reuters) – Czech Finance Minister Alena Schillerova said on Monday she would plead with the upper house of parliament to scale back a record tax reduction worth over 2% of gross domestic product approved by the lower house against the government’s wishes.
Deputies from both ruling coalition and opposition parties voted on Friday for proposals from both sides of the aisle to slash taxes by about 130 billion crowns ($5.88 billion) from next year.
The government had proposed cuts worth around 90 billion, mainly of personal income taxes, still a major reduction that some economists criticised as helping mainly top wage earners by chopping the main rate to 15% from 20.1 percent.
The other 40 billion crowns cut was proposed as an alternative by the opposition Pirate Party in the form of a flat tax credit that would help lower earners, but ended up as part of the final package.
The package was approved with votes from lawmakers in Schillerova’s own ruling ANO party as well as the centre-right opposition, the far-right and far-left parties.
“Two things went through which should not have gone through together… that’s why we will talk to the Senate,” Schillerova told a news conference after a regular government meeting.
She said she and Prime Minister Andrej Babis would discuss the issue with upper house Chairman Milos Vystrcil this week.
The upper house is dominated by opposition parties including Vystrcil’s Civic Democrats who backed the legislation in the lower house. The Senate is also a bastion of politicians holding regional roles, hostile to cuts that the bill would entail for local administrations.
Senators tend not to follow strictly the party line of their colleagues in the lower chamber.
The upper house can approve, reject or amend proposed legislation. If amended or rejected, the lower house takes a new vote on the amended or original form.
The government had proposed a 320 billion crown central state budget deficit for 2021, before the tax changes, leading to a public sector gap of around 4.9% of GDP after 6.4% in 2020.
($1 = 22.1020 Czech crowns)
Reporting by Jan Lopatka; Editing by Gareth Jones