Swallow the pill

Philippe Riboton

IF THE CURRENT GOVERNMENT can claim one outstanding victory, without a doubt it would be entering the Czech Republic into the very privileged club of countries with the highest levels of taxation. With the recent increases in both direct and indirect taxes, Mr Špidla and his fellow finance minister Bohuslav Sobotka will certainly be able to boast of their performance at the enlarged party of “Club EU” in Brussels. Just as certainly, some of their European counterparts will ask them how they managed to get the Czech population to swallow the pill. For only a half-dose, you would have already seen another revolution taking place in France, a country with a great tradition for public demonstrations and a reputation for its high quality of life – and its level of taxation. When looking at the figure released last month regarding the abyssal depth of the public-finance deficit, one can better understand where tax-payers’ money will go: to cover state guarantees (among other things). You know, it’s this “virtual money” that we all thought nobody would ever have to pay for when discussing cases like the IPB fiasco. Bad debts, they said, would go into this black hole called the Agency for Consolidation. The good news is, the government said that this will only happen once – therefore this should not be accounted for when calculating the structural state debt. The bad news is, we will all have to pay for it – at least once. Among those that won’t have to swallow the pill are some of the leading international investors looking for a new place to exercise their money in central Europe. In the automotive industry, for example. Incidentally, the Korean Hyundai decided not to set up shop in the Czech Republic (or in Poland) and opted for Slovakia instead. Of course, one should not jump to establish any connection with the fact Slovakia recently decided to implement a very favorable flat tax rate. Another kind of pill entirely.

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