The Czech centre-right coalition plans to introduce Tuesday a package on welfare, health care and tax reforms including a flat income tax rate to curb troubled public finances.

According to earlier reports, the cabinet plans to push through a flat income tax rate of 15% and to raise the lower of the two value added tax (VAT) rates, currently at 5%. Food now comes with a 5% VAT and would be more expensive, under the reform. Cabinet members say all taxpayers would save on income tax. „It is honest not take so much money from people and leave it up to them to decide their level of taxation... by how they spend it,” Finance Minister Miroslav Kalousek told the Mlada fronta Dnes newspaper on Saturday. In welfare, the government plans to save 23 billion koruny ($1.1 billion) by coming down on sick leave, removing child benefits from the rich and overhauling the system of parental benefits, earlier reports said. Unemployment benefits will go unchanged this time while tougher welfare reforms have been postponed until 2009, the year before the next general election. The cabinet would also like to introduce direct charges for a hospital stay, prescriptions and consulting a doctor or visiting an emergency room, reports said.
International institutions such as the World Bank have urged the former communist Central European countries to continue economic reforms to keep their booming economies on the growth track. However, the new EU members, often described as undergoing accession blues, have responded slowly to further belt-tightening reforms to curb spiraling public spending. The reforms are set to test the weak Czech coalition. The government, which can at most count on a tight majority in parliament's lower house thanks to two renegade opposition deputies, has yet to find support for its package in parliament.„I am convinced that in the end we will have to enlist the fragile majority that we have,” Prime Minister Mirek Topolanek told the Hospodarske noviny daily last Monday. While reports say that the Social Democratic opposition may support some of the proposals, the party has resumed its pre-election campaign against right-wing reforms. Social Democratic leader Jiri Paroubek vowed to abolish direct payments in healthcare, if his party is returned to power.