Czech PM wins confidence vote on tax bill

The Czech government survived a major crisis on Wednesday as parliament passed a tax hike which Prime Minister Petr Necas made tantamount to a confidence motion, thus thwarting a rise to power by the leftist opposition. The legislation, which slaps higher taxes on the rich and raises sales tax rates, was approved by 101 lawmakers out of the 195 present while 93 voted against. “This vote confirmed confidence in the government,” Necas said after the vote which was the seventh confidence motion against his centre-right administration since it took office in 2010. Protracted haggling with six rebel lawmakers from Necas’s right-wing Civic Democrats (ODS) party who threatened to topple his three-party coalition ended in compromise Tuesday, allowing for the smooth passage of the tax hike aimed at cutting next year’s public deficit to EU-mandated levels. Had the government been shot down by the right-wing rebels, a snap election would have almost certainly propelled the anti-austerity left-wing opposition Social Democrats to power with the help of the far-left Communists who ruled in former Czechoslovakia in 1948-1989. “We don’t want the government to fall and the Communists to take power,” rebel lawmaker Petr Tluchor said on Tuesday before he gave up his seat in parliament — part of the compromise saving Necas. Necas’s coalition had only 94 seats in the 200-seat parliament without the rebels, so it needed their support and votes from former allies now sitting as independents. Three rebels were replaced by new ODS lawmakers, two voted with Necas and one abstained while three independents also raised their hands for the tax bill. Necas, a 47-year-old physicist-turned-politician bent on tight spending, has seen his popularity slide since he took office in 2010 as recession-hit Czech taxpayers have faced austerity cuts, while corruption scandals and party infighting devoured his once comfortable parliamentary majority. The ODS was clobbered in senate by-elections last month which handed victory to the Social Democrats, who now dominate the Senate and are determined to return the tax bill to lower house lawmakers for a repeat vote. Despite suffering defeat in the by-election, the ODS re-elected Necas party chief and ordered the rebels should help pass the tax bill, a move which forced them to fold. The approved tax hike raises value-added tax rates to 15 and 21 per cent from the current 14 and 20 per cent. “We can now draft a state budget with a public deficit of up to three percent of gross domestic product,” Necas, a fiscal hawk, chimed on Wednesday. The tax hike is aimed at slashing the public deficit in 2013 to less than the European Union’s threshold of 3.0 per cent of GDP from 3.2 per cent expected this year. Uncertainty about the fate of the tax bill had led Finance Minister Miroslav Kalousek to withdraw the 2013 draft budget from parliament. “I appreciate the backing for this bill. I can now resubmit a budget which respects austerity, but which also includes investment in science and research,” said Kalousek. Alongside the tax hike, parliament was due to vote on a controversial pension reform bill vetoed by President Vaclav Klaus, and a bill returning assets seized from churches of 17 religious denominations during 41 years of Communist rule in the former Czechoslovakia. A country of 10.5 million people, the Czech Republic joined the EU in 2004 but has yet to join the eurozone. It sank into recession early this year, as austerity measures took a toll on growth.