PRAGUE, April 16 The Czech government may cut
sales tax on medicine to 10 percent next year, but government
spending plans are likely to rule out changes in other tax
rates, Prime Minister Bohuslav Sobotka said on Wednesday.
The three-party ruling coalition, led by Sobotka's Social
Democrats, agreed when it came to power earlier this year to
create a third value-added tax rate, to make medicines and books
cheaper, some time in the future. Medicines and books are now
taxed at the lowest rate, 15 percent.
The Finance Ministry has put together a draft EU-convergence
report that envisages a third VAT rate from 2015 and cuts the
current 15 and 21 percent rates one percentage point from 2016.
Sobotka said on Wednesday a third VAT rate is possible next
year, but lowering the top two rates would be difficult, because
the government plans raise pensions and increase infrastructure
investments next year.
"In the context of those priorities, I see the 10 percent
VAT rate for drugs as a decent and reasonable compromise. It is
an acceptable compromise for the Social Democrats," Sobotka said
after a weekly cabinet meeting.
The government has pledged to keep its budget deficit below
the EU limit, 3 percent of economic output, but it has backed
away from the deficit-cutting plans of the previous government,
to help an economy still recovering from recession.
The plan for a third, lower sales tax rate was agreed in the
government programme, but the cut in current rates was only
included in the Finance Ministry's convergence programme, a
document analysing the economic outlook that is sent to the
European Union's executive.
"Any change in other rates (besides a lower VAT on drugs) is
not part of the coalition programme, it is not agreed in the
coalition and it would have a budget impact that the Czech
Republic can hardly afford in the nearest term," Sobotka said.
The Finance Ministry calculated lowering both VAT rates
would cost 16.3 billion crowns ($820.40 million)in 2016.
($1 = 19.8684 Czech Crowns)
(Reporting by Robert Muller; Editing by Jason Hovet, Larry