Prague - The Czech government agreed today on a possible postponement of its flagship tax reform by one year - to 2014. Originally, it had been planned that the reform would come into force at the beginning of 2013.
The leaders of the Czech coalition parties are expected to confirm their decision on their meeting later today.
The tax reform includes a VAT increase from the current 15 percent to 19 percent. Also, health insurance payments by employees are planned to rise from 4.5 to 6.5 percent.
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Earlier this week, Czech Finance Minister Miroslav Kalousek and other government politicians admitted that another key bill, the pension reform, can get postponed by one year as well.
This announcement came just one day after the minister said in a televised talk show that the Czech economy may grow only 1 percent in 2012. In summer this year, the ministry had estimated a 2.5 percent GDP growth.
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The preliminary decision to postpone the tax and pension reform came amid this week's parliamentary obstructions held by the opposition parties, the Czech Social Democratic Party and the Communist Party. The opposition is trying to prevent the center-right government from passing its pension reform, criticized as "anti-social", through the Czech parliament.
The Social Democracy has said this week that it will end the obstructions if the government agrees to postpone the pension reform by two years, to 2015.
However, both the PM and Finance Minister say that the decision to postpone the two key reforms by one year has purely technical and legislative reasons.
Regardless of the true motivation of the government, the Social Democracy has already said that postponing the reform by just one year is not enough. "It is risky to implement the reform now, when there are such economic turbulences," argued Chairman of the Social Democracy Bohuslav Sobotka, referring to the recent turmoil in financial markets linked to the euro-zone crisis. According to Sobotka, financial markets will be more stable by 2015.
Also, Sobotka said that by postponing the reform -- considered "a controversial and risky step" -- by two years, Czech voters would have an opportunity to express their opinion in the general elections planned on spring 2014.
