According to MF daily, Vlastimil Tlusty, former Minister of Finance and 10 other Civic Democrats (ODS) member plan not to support planned fiscal reform, however their stance is not radical and they see some space for agreement. Tlusty, who prepared original fiscal reform says that current version is too soft and mismatch with ODS’s election program. The Parliament could start to discuss the reform as early as next week, although there is no fixed schedule for it yet.
Our view: Fiscal reforms address various issues, most importantly corporate income tax, which should decline over next three years from 24% to 19% (22% in 2008, 20% in 2009 and 19% in 2010). Introduction of flat 15% income tax from super-gross wages, i.e. gross wages including social and healthcare contributions. If approved, the beneficiary should be all stocks due to lower taxes. In particular CEZ and dividend stocks TEFO2, KB and PMCR. Besides there should be changes in lower VAT, which should increase slightly from 5% to 9%. Based on the past statements we expect some changes to proposed reform in order to arrive to some reasonable conslusion, however the negotiation process could be lenghty.