Legislation aimed at ensuring multinational companies with businesses in Czechia pay more tax was approved in the first reading by the Czech Chamber of Deputies (parliament).

It comes as Czechia copes with a structural deficit in public finances and mulls hefty public investments.

The parliamentary budget committee will now examine the legislation that could secure up to CZK6bn (€249mn) per year once implemented. The Czech Ministry of Finance estimates the legislation would affect several large corporations and some 3,200 companies operating under these conglomerates.

“It is difficult to measure the precise impact,” the ministry noted in its report for the parliament, saying it expects the measure “to have preventive character, leading the taxpayers not to move profits to other states and aggressively use tax advantages”.

The bill is aimed at large international corporations, including domestic ones, with registered consolidated revenues of at least €750mn in two of the four previous years. Under the new legislation, these multinationals would pay a minimum tax based on the revenue of their businesses in the country.

Some multinationals pay very little tax on their Czech revenues by deducting inflated costs from outside the country via biased transfer pricing, making overpriced loans from the mother company, and booking heavy royalty payments for intellectual property owned by entities in low-cost jurisdictions.

Minister of Finance Zbnynek Stanjura told MPs that the legislation transposes EU rules and urged speedy ratification. Opposition leaders, including Alena Schillerova,   Stanjura’s predecessor as well as parliamentary leader of the populist ANO party of  populist billionaire Andrej Babis , did not object to the legislation, though she vetoed quick full approval and asked for a discussion over the legislation details.

Austerity measures outlined this year by the centre-right cabinet of Petr Fiala could raise the current levy on multinationals from 19% to 21%. The cabinet has been battling a ballooning state budget deficit, something it has blamed on its predecessor, Babis' ANO-led cabinet.

Helena Horska, chief economist of Raiffeisenbank's Czech bank, stated at a Czech Export Forum organised by the Czech Chamber of Commerce on August 30 that the country’s economy is the only one in the EU that has not yet reached the pre-covid output.

President of the Confederation of Industry and Transportation, Petr Rafaj, added that Czechia had exhausted its competitive edge from the post-1989 era when the country was widely regarded as a regional leader, while other speakers called for more investments into public and technical infrastructure and relaxing administrative burdens on workforce from outside of the country.

Transport Minister Martin Kupka outlined “an investment storm” of CZK2tn into completing the motorway network and launching high-speed railroads connecting some of the regions with urban centres.

In an interview for an online news outlet Seznam Zpravy (SZ) he said “we cannot afford to miss the opportunity to use EU funds as happened in the past.”

SZ also reported on reported on another astronomic project worth CZK2tn for investing in an additional four nuclear units within the existing Dukovany and Temelin Nuclear Power Plants, which is part of the undisclosed analysis compiled by the Ministry of Finance.

While the investment estimates are calculated with prices from 2020, the analysis states that “Czech public finances are capable of securing the construction of 4 nuclear units,” even though it also warns that in combination with the rising deficit, the investment could become a burden for public finances in the coming decades.