Policy program reveals government plans to transform life in Czechia

The new Czech government’s leaked policy plan gives deadlines for sweeping reforms to modernize life in the country.

 William Nattrass

Written by William Nattrass Published on 07.01.2022 12:52:00 (updated on 07.01.2022) Reading time: 3 minutes

The new Czech government has taken power at one of the most difficult times imaginable. New Finance Minister Zbyněk Stanjura yesterday announced that the state budget deficit for last year was a record CZK 419.7 billion. The arrival of the Omicron Covid variant in the country could yet plunge the Czech Republic into further Covid restrictions.

Nevertheless, Prime Minister Petr Fiala’s new regime has agreed a bullish policy program seeking to transform the country in the coming years. The program will be presented to parliament for approval next week, but details have already been leaked to the press. So, what changes can be expected in the coming years?

A transport revolution

The new regime is focusing on a comprehensive revitalization of the Czech Republic’s transport infrastructure. The government wants to add an extra 200 kilometers to the nation’s highway network by 2025, and envisages another 150 kilometers being added to the high-speed rail network by 2030.

Road and rail infrastructure problems have long plagued the Czech Republic; a lengthy renewal of the main D1 motorway was finally completed last year nine years of roadworks, and now further works on the main transport artery are already planned.

Significant funds will need to be found for the government’s ambitious transport plans, with the new Transport Minister already announcing that hefty public transport discounts for students and pensioners will be canceled to pay for developments.

Pension reform

Another major priority for Fiala’s government is pension reform. The policy statement says that the first stage of reform should be achieved by 2023, though it is not yet clear exactly what this stage will involve. Parties in the coalition have previously stated a desire to set a new retirement age limit, while introducing separate retirement ages for more physically demanding professions.

New Finance Minister Stanjura has meanwhile confirmed that the government wants to allow workers to send one per cent of their earnings to retired parents or grandparents to make their old age more comfortable. A financial bonus for having raised children is also planned for retired people.

Higher VAT and flat tax ceilings for entrepreneurs

The new government wants to raise the threshold at which self-employed people must register for VAT from the current CZK 1 million per year to CZK 2 million. The VAT threshold has remained stubbornly at the CZK 1 million mark since the country joined the EU in 2004, despite the significant inflation seen since that time.

Stanjura said that the government hopes to also raise the upper limit for qualification in the “flat rate” tax scheme (paušální daň) to CZK 2 million per year, in line with the change in VAT registration. This change has, according to Stanjura, been included in the policy program because “we consider it logical that the ceiling for the flat tax rate should rise at the same time [as the VAT registration increase].” The flat tax rate is open to foreign entrepreneurs who are tax residents of the Czech Republic.

Covid-19

It’s feared that the arrival of the Omicron Covid variant in the Czech Republic could lead to more cases and, as a result, further restrictions. But the new government has so far encouraged a more liberal attitude with respect to the virus than the previous regime, arguing that the country must “learn to live with” Covid.

Still, the policy program provides for the revision of current crisis management systems and the creation of a central agency and research institution dedicated to disease control and prevention similar to the Robert Koch Institute in Germany.

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