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President Vetoes Bills on VAT, Real Estate Tax

President Vaclav Klaus has vetoed a bill on the value added tax (VAT) and a bill on real estate tax, Petr Hajek, spokesman for the Office of the President, announced Friday. Klaus considers the bills “a bad mixture of measures that the Czech Republic has to take before its EU accession with disputable measures that will have a series of adverse consequences for Czech citizens and businesses,” says Hajek.

The bills now return to the lower house of parliament, the Chamber of Deputies.

Both bills are part of the public finance reform drafted by the coalition government of Premier Vladimir Spidla.

Under the VAT bill, the government proposes cutting the basic rate from 22 % to 19 %, and transferring many goods and services from the lower to the higher VAT bracket. The lower VAT rate should remain at the current 5 %.

Over 50 % of all deputies – 101 – must now vote in favor of the bills in order to override the presidential veto.

Prior to the announcement, Labor and Social Affairs Minister Zdenek Skromach told reporters that the government was ready to call an extraordinary session of parliament in order to push the bills through if they were vetoed by the president. “The coalition is ready, and it will have 101 votes,” said Skromach. The bills must come into force on 1 May 2004, otherwise the Czech public finance system will collapse, says Skromach. If the bills are not passed on time, private entrepreneurs will have to pay an advance 50 % VAT deposit by April 24.

According to the consulting firm KPMG, failure to pass the bills would also cause chaos and collapse in foreign trade.

According to analysts, the VAT changes will raise the average Czech household’s monthly costs by CZK 5,000 to CZK 10,000. The new bill would increase VAT on coffee, tea, chocolate, food, and hotel services, tickets for sporting events, hygienic products, hairdressing, drycleaning, cable TV, animal food, and other goods and services.

On the other hand, the bill leaves food, water and sewage, newspapers, magazines, medicals, tickets for cultural events, and diapers subject to the lower 5 % VAT.

(Interfax 09.iv.04)

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