The Czech Parliament on Friday voted against a package of tax amendments proposed by the government, which included a cigarette excise tax increase. The finance minister now intends to submit a slightly revised proposal to Parliament. If the tax increases are not approved, the 2003 budget deficit stands to rise by approx. CZK 10 bil. to CZK 167 bil. next year.
While an excise tax increase would affect Philip Morris CR (marginally though, since the proposal calls for an increase similar to previous expectations), a rising budget deficit increases the prospect of a quickened CEZ privatization, we believe (the Cabinet claims CEZ privatization will not take place before 2004).
Moreover, the failure of a coalition-government member to support the proposal will probably result in a Cabinet shuffle, though we do not expect a destabilized political situation as result of the parliamentary setback for the coalition.
Jiri Soustruznik