Czech cabinet to approve 2020 budget

The cabinet will approve the 2020 budget proposal, CSSD president and interior minister Jan Hamacek told journalists. Hamacek specified that there were some issues yet to be worked out, such as growth of wages in the public sector, which is yet to be negotiated with trade unions. He didn’t mention anything about taxes, however, specifically the bank asset tax proposal that the CSSD has made, and which ANO has been opposing. Hamacek expressed hope that the ruling coalition partners will reach agreement on all issues by Jun 20, which is the deadline within which the government needs to approve a spending ceiling. In line with local legislation, the finance ministry made a proposal of spending ceilings by institution, though it is preliminary and can change throughout the course of budget preparation.

At this point, it appears that some of the main budget points will be kept, like a deficit target at CZK40bn at state government level. There is already a compromise solution on the child allowance hike, as there will be no retroactive increase of the amount, but the hike will apply to anyone who is still on parental leave as of the beginning of 2020. Basically, the only things that need to be worked out is wage growth in the public sector (the finance ministry has proposed 2%, with a 10% hike in teachers’ salaries) and the remaining taxes, like the choice between a bank asset tax or a government innovation fund, which should start with contributions from commercial banks (an idea of PM Andrej Babis).

The bank asset tax issue may provoke some conflict, but we believe this will be worked out as well, possibly by adopting similar measures but not with such a big impact. The thing is, even with a bank asset tax, the 2020 budget doesn’t appear to be that solid, given that expectations for weaker GDP growth (at 2.4% in 2020) suggest the revenue intake will be much smaller.

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