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Czech PM Babis puts grand $3.5 bln tax cut to a vote

PRAGUE, Nov 19 (Reuters) - Czech Prime Minister Andrej Babis put the biggest income tax cut in decades to a parliamentary vote on Thursday despite criticism that it will make a hole in the budget and help top earners much more than the rest.

The tax cut - which Babis says is needed to encourage spending to help overcome the coronavirus crisis - is estimated to cost the public finances 79 billion crowns ($3.54 billion) or 1.3% of gross domestic product.

It has been opposed by the junior ruling party, the Social Democrats, who have pushed for a lower tax cut paired with write-offs to benefit low-income groups.

The country’s budget advisory body said the cut in the main tax rate to 15% from the current 20.1% increases inequality.

The far-left Communists, who prop up Babis’s minority government, have also rejected the cut, saying it would dent public revenue too much.

Babis and his ANO party may find support for the plan among the centrist and right-wing opposition, although those parties also accuse Babis of trying to shore up support less than a year ahead of a general election.

Babis and his finance minister, Alena Schillerova, have pushed the tax cut as the best way to spur domestic spending and help an economy expected to fall 7.2% this year, according to the central bank’s outlook.

With state revenue sinking and spending growing amid the global coronavirus pandemic that has disrupted business, the government was planning on a 320 billion crown deficit in the 2021 budget, before including the tax cut. That is down from a planned deficit of 500 billion crowns this year. (Reporting by Robert Muller and Jason Hovet; Editing by Giles Elgood)

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