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Czechs to scrap FDI incentives for manufacturing

Pharma

The Czech government approved on Monday a plan to cancel a law offering incentives to investors in manufacturing, saying the support distorted the market and made no sense with unemployment at record lows.

“The government agreed with termination of the last exemption for the manufacturing industry, which is a five-year tax break as the government has been lowering the tax burden for corporates,” Industry Minister Martin Riman told a news conference. “On the other hand, incentives will rise for sophisticated projects of an innovative character such as technology centers,” he said.

The ministry also said in the proposal discussed by the government there was not much room left for big investors in the fast growing EU member country due to drying pool of skilled labor. It said incentives were not key motivation for most investors and that new projects often were mere expansions at existing factories, mainly in the booming car sector. The proposal faces a rough ride in parliament, where the government holds a shaky, razor-thin majority based on defectors from the leftist opposition.

The ministry expects the law to be cancelled in the Q1 of the next year. The state granted incentives totaling 139 billion koruna ($8.75 billion) to 366 projects worth nearly 344 billion between 2000 and 2006, the document showed. Some 36 investors currently supported by the incentive system are expected to spend more than 13.5 billion koruna by 2011, the ministry said. The jobless rate dipped to 5.6% of the workforce in March. (Reuters)

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