As of tomorrow, several tax adjustments are effective in the Czech Republic:
* Corporate income-tax rate will decrease to 28% from 31% (note that the tax rate will further decline to 24% by 2006)
* Excise taxes on cigarettes, alcohol, and gas will rise considerably (e.g., effective excise-tax rate on cigarettes will increase by approx. 500 bps)
* Several services will be reclassified from the 5% to 22% VAT class. Most importantly, the reclassification will affect telecommunication services; operators are expected to largely reflect the VAT increase in their tariffs.
As these tax adjustments have been broadly known for a long time, we believe they have already been reflected in market expectations and stock prices.