Although the Social Democrats fell out of the House of Representatives after the last election, their political spirit knows how to find ways to ventilate the highest political positions. For example, the idea that the need for pension reform is a myth has taken root in the ranks of the ANO movement, because the worst that can happen to us is that we spend 13 percent of GDP on pensions, which is what some countries routinely do today.
It should therefore be noted that even the proponents of this idea in the ranks of social democrats, for example Vladimír Špidla or Jana Maláčová, also had the need to seriously deal with the pension system and let expert commissions work on it, which came up with interesting results. They don’t stop at anything like that in ANO.
Now, another typically social-democratic concept is sticking out – and even in government ranks – the horns: the sectoral tax. Specifically the banking one. According to the first balloons, it seems that the Pirates, the folk and the Elders would be willing to discuss such a concept.
These considerations undoubtedly stem from the fiasco that the bank tax on extraordinary profits has turned into. It’s interesting, but somewhat telling, that when the banks pay a fraction (roughly two percent) of what the Treasury expected for the windfall tax, politicians are mad at the banks for not paying, instead of being mad at the Treasury for not being able to write a workable law. And so they begin to think about how to get financial houses to get a tip elsewhere.
Perhaps it would be good to stop before all these considerations, take a deep breath and remember how similar attempts usually turn out. Windfall tax is a fresh experience. But then there is one more.
It is 2019, the prime minister is Andrej Babiš and everything is “national” and “investment”. The National Investment Strategy, the National Investment Fund, the National Investment Plan, etc. are being created. At the same time, Czech banks are experiencing good years, a big topic is the payment of “Czech” dividends to foreign mothers, and there are also social democrats in the government – so the idea of a sectoral tax appears on the table.
Prime Minister Babiš rejects it. But since the outflow of dividends to foreign countries is causing him wrinkles, he invents a fund. “National” of course. And “developmental”.
The National Development Fund was born in September 2019 with the signing of a memorandum, which the then Minister of Industry and Trade Karel Havlíček described as “groundbreaking”. It is said to be a demonstration that “the state can cooperate with big business in a different way than just a regulation, rather than just a specific tax, on a voluntary basis.” The Big Four banks promise to send seven billion crowns to the fund. To begin with, because the potential of the national and, moreover, the development fund is practically endless. In November 2020, the fund receives a CNB license and can begin development.
So how does it look after a few years? The National Development Fund did not support a single project. It does have a nice website, but the most recent “news” on it comes from September 2021. There is also an annual report for 2022, in which we read that the fund did not support any projects, but managed to generate a loss of nine million. Then there is a lot of high-flown talk about visions and colorful pictures from photo banks.
One would think that a double fiasco, one Babiš and one Stanjur, could end the thinking about the Czech state’s ability to tax the banking sector and direct the politicians’ brain trust in more useful directions.
For example, to the question, why does the state subsidize the banking business and its randomly selected products, such as pension or building savings or mortgage loans, in the form of tax rebates?
At the same time, for example, pension savings could never be even remotely competitive against other forms of saving money, if the state did not send billions of crowns a year to support it and give up billions more for tax deductions. This makes it a good tool for tax optimization. Is it really the support of responsible savers? Isn’t it more like subsidizing an otherwise crappy product?
Instead of inventing new taxes, the state, if it would like to save, could quite easily consider limiting or reevaluating this form of subsidy for the banking business. There are tens of billions in it.
The question of why Czech banks and their mothers do not want to reinvest domestic profits in the country deserves further consideration. Is this really just the greed of foreign shareholders, or could it be related to the Czech investment environment?
Sector banking tax need not be taboo. But past experience shows that we really can’t deal with it here. Yes, the banks are doing well, but the social democrats are no longer in government, so perhaps we wouldn’t even have to deal with it.
