(He said in August that any retreat from the plan to raise value added tax was on "the verge of political and economic imbecility").Having failed to get a bill on that through parliament when six of his lawmakers defected, Mr Nečas has sent it back to the chamber but this time tied to a confidence vote.
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So why is he raising value-added tax by three points, to 21%?
This has been partly paid for by raising value-added tax (VAT) from 15% to 20% over the same period.The last time such a fast-paced shift from direct to indirect taxes occurred was during the government of Margaret Thatcher.
The answers poured forth: the party had broken its promises (by raising value-added tax); it had bowed to free-market ideology by reforming pensions and labour markets; and its leaders had been aloof, unresponsive and had bickered among themselves.
To bring budgets into balance and restore growth, the O.E.C.D. calls on governments to shift the fiscal mix away from direct taxes and toward indirect levies — for example, by raising value-added and property taxes and reducing tax loopholes, rather than increasing income tax and social security charges.
Hungary, for one, has done itself no favours by imposing a hefty bank tax, raising value-added tax from 20% to 27% and threatening other taxes on telecom users and oil companies.Bigger fears of Greek contagion surround Serbia, Romania and Bulgaria, because Greek-owned bank subsidiaries have a big share of their banking sectors.
Even after surviving the confidence vote, Mr. Necas might not have enough support to pass unpopular measures, including raising the value added tax by one percentage point, raising income taxes and slowing down increases in state pensions.
Just this week, moreover, the government raised the value added tax across a vast array of goods and services from 17.5 percent to a record 20 percent, provoking a stampede of last-minute consumption before the increase took effect.
Case in point: last summer Greece raised their value added VAT tax to 23% from just 17% and today they're teetering near bankruptcy.
So the awkward moment when I raised objection to value added measurement truly reflected the different positionality of the three people in the room.
