Czech President Vaclav Klaus urged parliament on Monday to reject tax hikes in a vote this week that was intended to reassure investors but instead may shatter the cabinet. The tax vote is one of two big near-term tests for the centre-right coalition, unpopular due to austerity measures and a series of graft scandals. The other test is on whether to return billions of dollars worth of church property confiscated by communist rulers over 60 years ago.
Prime Minister Petr Necas says the plan to hike the value-added tax, for the third time since the start of the economic crisis, is essential to cut the budget gap. He says his government may quit if its plan is rejected. But the tax proposal has raised protests among backbenchers in his Civic Democratic Party, weakening the position of the coalition which needs every vote to push the legislation through.
President Klaus, along with some private sector analysts, has said the planned 1 percentage point rise in value-added tax rates, to 21 and 15 percent next year, would further depress demand in the recession-hit economy. Klaus, visiting an elementary school on Monday as the new school year began, called on deputies to reject the plan. "I believe that common sense will prevail in the lower house tomorrow," Klaus told reporters.
Necas's coalition has 100 votes in the 200-seat lower house, and has had to rely on a handful of independents to back its legislation. It will need 101 votes to overrule an upper house veto of the tax hike when it meets later this week, and to override a potential veto from Klaus. An influential backbencher in Necas's centre-right Civic Democratic Party, Petr Tluchor, has repeatedly protested against the tax hike, but has declined to say how he would vote. Other MPs have, according to Czech media, also been hesitant.