Government’s Austerity Package: Czechs to Pay More for Beer and Medicine

The Czech parliament’s lower house has approved dozens of measures proposed by the government designed to keep the ballooning budget deficit under control.

Czech citizens are a step closer to paying more for beer and medicine while businesses will face higher corporate taxes.

In the 200-seat house, 108 MPs from the ruling coalition voted in favour of the plan, while 86 opposition members were against.

When the government introduced the package in May, Prime Minister Petr Fiala said the proposed cuts, tax increases and austerity measures are necessary because the pace of the debt rise is “threatening.”

Fiala said Friday the measures should reduce the budget deficit by 97 billion Czech crowns next year and by 150 billion in 2025.

As a result, the deficit of 3.5% of the GDP expected for this year should drop to 1.8% next year and to 1.2% in 2025.

The package still needs approval from the upper house, the Senate, where the coalition government has a majority, and presidential approval before becoming effective next year.

Rising beer tax

Corporation tax will go up by two points to 21% while property tax for individuals will be also increased, as well the tax on alcohol, tobacco and betting.

Value-added tax will have two rates, 12% and 21%, instead of the current three — 10%, 15% and 21%.

Medicines will move from the 10% rate to 12%, while people will pay 21% VAT on their beloved beer in bars.

The package is a compromise reached by Fiala’s five-party ruling coalition that took over after defeating populist Prime Minister Andrej Babiš and his centrist ANO movement in the 2021 parliamentary election.