Final Word from Monday, March 14, 2011

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Until last week, VV had fought tooth and nail to prevent the unification of the two VAT rates, having guaranteed its voters in Dec. that the VAT on basic food items would not be increased. Needing to find an explanation for violating its promise, it is now saying that it was the position of the Economic Chamber on social-security tax that allowed it to accept the single VAT rate. You see, the Economic Chamber had pushed for a single 17% rate and was willing to give up a 1.8-point drop in the employer's social-security tax to see the unification happen. According to Vít Bárta of VV, the Chamber realized that lowering the social tax would not necessarily create jobs anyway. Instead of lowering the payroll tax, he said, this money can be used for a child tax credit that fully offsets the higher VAT on food. Bárta's explanation is convoluted but has a very specific aim: When higher taxes and higher government spending lead to higher prices and higher unemployment, he wants people to blame the business sector and not VV.