Swallow the pill
Written by: 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.