Raising taxes

The failure to sell Český Telecom will add to the government's budget problems, analysts say. Past privatization proceeds have generally flowed into the state budget, allowing the government to spend more each year than it raises from taxes or borrows from banks and investors. With several unsuccessful privatizations in a row, the question now arises how the government will cover the shortfall. ČSSD has already signaled that taxes could rise after the elections, but ODS and the Coalition remain in favor of a tax cut. Finance Minister Jiří Rusnok criticized the Coalition this week for promising lower taxes at the same time as higher social payments. Reducing bureaucracy, as proposed by both ODS and the Coalition, could make this possible, but it seems unlikely that the government will get more efficient before taxes have to be raised.