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Towns could get tax money

Finance minister says new bill will minimize city losses

By Victor Velek
Staff Writer, The Prague Post
October 10th, 2007 issue

Small towns may get to beef up their budgets with new tax revenues next year after they complained that current tax allocations are unfair.
A new bill approved by the Cabinet Oct. 3 would send more money to small municipalities across the country. In total, all municipalities will get some of the extra 4.6 billion Kč ($237.5 million) next year if the bill is approved by Parliament.
Finance Ministry officials originally proposed a smaller tax boost. But, after politicians in the ruling Civic Democratic Party (ODS) — a party with a support base in urban centers — protested the original would harm large cities, the ministry rewrote its original proposal. Thus small-town budgets will be boosted while losses to large cities will be minimized, said Finance Minister Miroslav Kalousek, a Christian Democrat.
“We approved a version which will be 2.1 billion Kč more costly for the state budget than the original proposal,” Kalousek said.
Fewer than 20 cities are expected to receive less government money than they do today under the new proposal. Except for Olomouc, central Moravia, losses would be negligible, according to Kalousek. The Cabinet is to compensate Olomouc by a separate measure, he added.
“We definitely welcome the government decision, especially after the ODS said no to the original draft,” said Petr Gazdík, mayor of Suchá Loz, one of the most vocal critics of the current law.
“It would have had a catastrophic impact on the budgets of small towns if it had not been accepted.”
Suchá Loz recently lodged a complaint against the Czech Republic with the European Court of Human Rights in Strasbourg, France. The town argued that the current tax allocation system is discriminatory because it grants the smallest hamlets 6.5 times less tax money per capita than it gives to Prague.
After the Finance Ministry committed itself to improving the small-town tax situation, Suchá Loz and its partner in the dispute, Vysoké Pole, withdrew the complaint, Gazdík said.
Current tax divisions are based only on population size. The new system introduces other criteria for calculating tax shares — a town’s geographical size, for example.
Sharp tax bands based on population currently cause two similarly populated cities to draw different tax amounts. For example, Olomouc and České Budějovice, in south Bohemia, have both around 100,000 residents but their incomes differ greatly.
České Budějovice currently gets 270 million Kč per year less in redistributed taxes than Olomouc. That’s because České Budějovice features slightly fewer than 100,000 people, so it gets a smaller tax revenue pot of money.

Victor Velek can be reached at vvelek@praguepost.com


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