GO
Loading...

UPDATE 2-Czech tax vote delayed as PM tries to stave off revolt

* Failure to approve bill would lead to government collapse

* Delay pushes vote beyond party congress

* Tax debate is part of power struggle in PM's party

(Updates with postponement approved, analyst comment)

PRAGUE, Oct 30 (Reuters) - The Czech Republic's ruling coalition postponed on Tuesday a vote on a law to raise taxes that will double as a vote of confidence in the government, hoping extra time will allow them to prevent a lawmakers' rebellion.

Prime Minister Petr Necas' cabinet will resign if the 22 billion crowns ($1.14 billion) mainly in additional value-added and income tax is rejected. With his centre-right coalition holding 100 seats in the 200-seat lower house and six of these threatening to rebel, government parliamentarians opted to delay the vote initially scheduled for Wednesday until next week.

It will not now go ahead until after a congress by Necas's Civic Democratic Party this weekend, putting the issue at the heart of a power struggle within the group.

``We failed to find an agreement at the morning meeting of our working group, and at this point the most rational way is to propose an interruption of the parliamentary session until next Tuesday,'' the chief of the Civic Democrats' parliamentary faction Zbynek Stanjura said.

``We will vote next week no matter what, even with the risk that the government will not survive.''

The government wants tax hikes and spending cuts to bring the budget deficit below 3 percent of output next year. This has trimmed borrowing costs to all-time lows but prolonged the longest recession in the European Union's emerging east.

Dissenters, supported by President Vaclav Klaus, argue higher taxes would prolong an economic contraction that began in late 2011.

Necas and his coalition partner TOP09 say the fall of the cabinet should lead to an early election. Czech law however allows for a new cabinet to be formed without an election when a prime minister falls, and many right-wing deputies may prefer to avoid an election they fear they might lose.

LEADERSHIP THREAT

The prime minister, weakened by the unpopularity of austerity measures, defections from his coalition and a drubbing in regional elections earlier this month, will defend his party chairmanship as well as his cabinet's policies at the congress.

Some of the rebel backbenchers have urged a change at the party helm but no one has come forward to run against Necas, who is seen as untainted by graft scandals.

Analysts have said rebels, some of whom have been removed from senior jobs by Necas, are jockeying for power in the party.

Necas's delaying tactics may be a clever move, said political commentator Petr Honzejk.

``I believe this is favourable decision for Necas, because if a vote went through now and the cabinet fell, he would go to the congress already as a prime minister in resignation, which is the option the rebels had counted on,'' he said.

``The congress will be the key for the cabinet's survival. I believe it will stay, because there will not be enough people to benefit from the cabinet's fall and from an election.''

The centre-left Social Democrats, who lead opinion polls by a big margin, have been calling for an early election. The party wants to raise the country's tax level much more than the current government, mainly by higher taxes for companies.

(Writing by Jan Lopatka; editing by Jason Hovet, Andrew Roche and Jason Webb)