Czech Government Proposes 58 Measures To Reduce State Budget Deficit

The Czech government has proposed a new package of 58 measures, aimed at consolidating the state budget by reducing the deficit by CZK 94bn ($4.3bn) from 2024. The measures are expected to have a cumulative impact of CZK 147.5bn ($6.7bn) on the budget over the next two years. The government plans to approve the legislative text for the package in June, with the first reading taking place before the summer recess so that the measures that would reduce the deficit can come into effect on 1 January 2024.

The proposed measures are expected to impact state spending and revenue. Among the major spending cuts, the national subsidy titles for entrepreneurs would see the highest impact, at CZK 54.4bn ($2.5bn). The government will also seek to reduce spending on the operation of state institutions, which is expected to generate savings of CZK 11.2bn ($511.3m) and reduce salaries in the public sector, resulting in savings of CZK 9.7bn ($444m).

On the revenue side, the government plans to increase consumption taxes on tobacco products and liquor, generating additional revenue of CZK 7bn ($321.4m). It will also scrap 22 tax exemptions, generating CZK 7.6bn ($349m), and reintroduce health insurance contributions for employees at a rate of 0.6%, which will generate revenue of CZK 13bn ($596m). The government will increase the tax on the income of legal entities to 21%, raising revenue of CZK 22bn ($1bn). In addition, it plans to increase the contribution of self-employed persons by CZK 7.5bn ($344m) and the property tax, which will generate revenue of CZK 9.3bn ($426m).

The government also plans to cut state support for housing savings accounts, reducing the annual limit for both new and existing contracts to CZK 1,000 ($45.8). The move is expected to generate savings for the state budget but may impact those who rely on such savings to purchase their homes.

Another cost-saving measure in the package is the proposed closure of 77 regional offices of the financial administration and an increase in the price of motorway vignettes, which will rise from CZK 1,500 ($68.8) to CZK 2,300 ($105.4) per year.

It is worth noting that the measures proposed in the package are still subject to the legislative process, and it remains to be seen how many of them will eventually be implemented. However, if implemented as proposed, the measures will significantly impact public spending and revenue, affecting businesses and individuals across the country.