People returning to work after their summer holidays were slightly more enthusiastic at private language schools than at most other businesses this month.

The reason: a 14 percent decline in valued-added tax (VAT).

"It was a relief for us," said Petr Plocek, language-course manager at Channel Crossings language agency. "The current [19 percent] tax caused us to [financially] trail behind state-owned language course providers, who were exempt from the duty to pay VAT."

Last month Parliament approved a reduction in the VAT charged at private schools and other language-course providers. As of January 2006, the VAT charged on language courses will drop from 19 percent to 5 percent.

Private language schools have been pushing for a reduction of VAT since the tax increased in May 2004, following the Czech Republic's accession to the European Union.

Plocek said the reduction will enable private language schools to lower the prices of their courses, which in turn could encourage more students to take classes.

"The drop in fees for courses could amount to 1,000 Kč [$41] per semester. ... This could make the courses more attractive, especially for individual students," Plocek said.

When the tax increased 14 percent in 2004, there was a noticeable decline in the number of individual students attending the classes, said Skřivánek language agency owner Pavel Skřivánek.

The tax decrease will also permit the highly competitive private language schools to increase profits.

"We could not afford to increase the prices in proportion to the VAT rise," said Jaromír Ježek, director of The Language House.

Ježek, who has worked in the language-school sector for 14 years, also said that the tax reduction could make language courses more affordable.

Though he admitted the tax reduction will improve language schools' profits, the clear priority at The Language House will be to make courses affordable for the general public.

Voucher incentive

The language-school sector could receive a further boost from the national plan to support language studies recently drafted by the Education Ministry.

The plan aspires to improve people's foreign language skills by upgrading education programs at schools and creating incentives for employers who pursue language courses for employees.

The Education Ministry intends to establish a fund from which it would finance language vouchers that could be distributed to employees in companies that sign up for the program. The ministry would also like to offer tax relief to companies that offer language courses to their staffs.

Channel Crossing's Plocek said that while distributing vouchers among employees is not a bad idea, companies could also recommend selected language-course providers in order to ensure effective programs for employees.

"When companies hire language agencies to train their staff, they thoroughly shortlist the most suitable language firms. ... However, this wouldn't be the case if employees were left with unlimited choice to pick any language course available on the market," Plocek explained.

Language House Director Ježek said that companies should require employees obtain certificates that verify their language proficiency.

The upcoming negotiations over the 2006 state budget will significantly affect the future of the National Plan of Supporting Language Studies.

Education Minister Petra Buzková requested some 2 billion Kč to fund the program in 2005–08. She said that schools could not be expected to implement the plan without additional funds.