The government does not care about the environment. With the consolidation package, it denied its own promises

Cuts and reforms do not only have an economic dimension, which is prescribed in the state of public finances, the budget deficit and, of course, in the wallets of all of us. A large part of the introduced measures also has an impact on the ecological side of life.

For the environment and for the motivation of people to behave ecologically, none of the details is absolutely essential or totally harmful. But their combination shows that no one had in mind the impact on the environment when discussing this package, so we are in for a definite worsening of the situation in this area.

Almost everyone will be affected by the increase in VAT on public transport from ten to twelve percent. After the recent wave of fare increases and cuts in discounts for students and pensioners, public transport will be even more disadvantaged. A small consolation is the fact that the price of the highway stamp will finally rise after many years and at least match the long-term increase in public transport fares.

Moving the VAT for repairs of bicycles, clothes or shoes to a higher rate is also going in a negative direction. It’s both un-ecological and anti-social — instead of encouraging the reuse of things, repairs become even less profitable, giving people more incentive to throw things away and buy new ones.

Bicycle transport pays off for the state. They know it in Europe, not here

Bicycle repairs are discounted in many countries, and recently the European Union even allowed the sale and rental of bicycles and e-bikes to be included in the reduced VAT rate. Portugal, for example, reduced the VAT on bicycles and e-bikes essentially in a reversal, with the clear aim of more than doubling the proportion of people using this method of transport by 2030.

The absence of long-term thinking about goals is perhaps most visible at this point. There are countless studies that describe the benefits of supporting cycling not only for the environment or the quality of life in cities, but also for reducing public healthcare costs.

For example, in the Netherlands, the health benefits of supporting cycling are estimated at 19 billion euros per year. Unfortunately, the Czech Republic is going in the opposite direction — repairs will become more expensive, bicycles will not receive a lower VAT rate, and the support of bicycle transport as a strategic priority is left to enlightened local politicians, without tax or other support from the center.

There is one more detail associated with bicycle transport, but it is symbolic: while children’s car seats will be at a lower rate, children’s bicycle seats will be at a higher rate. The state thus shows that driving children by car is worthy of support, while driving them by bicycle is not.

For waste recycling, the package is a disaster

The absence of thinking about the wider impacts of the proposed changes undermines the government’s intentions even in the transition to a circular economy. An increase in VAT on the processing of waste or secondary raw materials will put recycling at a disadvantage. Although the government supports the circular economy in its program statement, it is directly against it in terms of taxes.

Waste charges will become more expensive for everyone, regardless of how and how much they sort or whether they use recycled materials. In addition, this move has a very negative effect on supporting the development of the recycling industry. The tax advantage of recycling is one of the important conditions for its development.

The paradox is that the government is canceling a measure that was relatively recently, in 2021, enforced by members of the government parties STAN and Pirátů, Jana Krutáková and František Elfmark, and which first in step analysiswhich can help the reuse of waste in the Czech Republic.

With this, the Czech Republic is shooting itself in the foot not only in terms of waste prevention and efforts to end landfilling in 2030. With the newly introduced pan-European tax on non-recycled plastics, we as a country will have to pay for the amount of plastic produced.

Some countries are trying to reduce its amount by promoting more recycling, while others — for example, Spain and Italy — add their own taxation of non-recycled plastics in order to have something to deduct this fee from. The deterioration of the tax conditions for recycling thus apparently means that the government will have to pay more to the budget of the European Union for the production of waste. The overall financial effect will be questionable, but the impact on the environment will be clearly negative.

If the government wanted to improve the budget and the environment at the same time, instead of raising the VAT on recycling, it was appropriate to introduce burning feewhich will promote recycling and limit the excessive construction of waste incineration plants.

Burn waste instead of firewood?

Firewood, wood chips, sawdust or pellets and briquettes made from them were also reclassified to a higher VAT rate. This will increase the cost of biomass heating. In part, this will motivate people more to burn waste, and it will also drive more people into the forests to collect wood illegally.

Firewood and similar products move in the same market as gas and electricity, and if the price of energy goes up, so do their substitutes, even though the cost of their production does not rise nearly as much as it does for electricity or gas.

Over the past year, wood or pellets have become significantly more expensive, and with the increase in VAT, their price will increase even more. At the same time, heating with wood is often the last option for many poor households in the countryside to fight the increase in energy prices.

The proposal to increase fees for mining coal or minerals goes in the right direction, but not far enough. On the same day, the huge profits of energy fossil companies were announced, which are also generated by the fact that the state allows them to mine under favorable conditions. Although coal fees will play a smaller and smaller role in the budget as mining ends, in the coming years it will still be billions that fossil companies will earn at the expense of the Czech Republic.

It’s the same with diesel taxation. Although the government will return the tax to the form before the war in Ukraine, but still not to the form before the tax package in 2020. At the same time, tax support for diesel is undesirable for many reasons, whether it is negative effects on climate protection, air pollution in cities or fair situation on the transport market.

An increase in the tax rate on live plants, seeds and similar assortment will make the greening of cities or municipalities or the addition of various building projects with green elements more expensive. At a time when there is a need to support the adaptation of cities to climate change, the government has come up with another step that goes against the promises in the government’s program statement.

By increasing the VAT on all beverages, the government partially solves the problem of distinguishing between healthy and unhealthy foods, although the models widespread in Europe, which categorize foods and beverages according to their harmfulness, are undoubtedly more appropriate. With a few exceptions, packaged drinks are less healthy. However, the inclusion of baby water in the same rate as beer remains reasonable.

However, complications can be expected with plant-based milk alternatives. While regular milk is a food and will be at a lower rate, plant-based “milk” that is already sold as “oat drink” for example will be at a higher rate. The government has already actively attacked animal food alternatives in the form of misleading campaigns paid for by the state or by trying to bans on the use of generic food names. Now it has come up with another disadvantage for those who want to consume food with a lower impact on the planet.

What will happen to environmental subsidies?

And finally: cuts in subsidies are still a big unknown. It is not clear what areas they will cover and how they will affect, for example, the support of renewable resources, adaptation to climate change or the greening of agriculture. So far, only so-called blunt cuts, i.e. across-the-board budget reductions, have been introduced. And from the little that has escaped, we cannot speak of any prepared material.

For example, the plan to shift payments for renewable energy sources from the state back to consumers is only an apparent saving, as it will of course increase costs not only for households, but also for public institutions, schools or hospitals.

Prime Minister Fiala’s thoughts that it would be possible to cancel these payments prematurely, because the projects “have already been paid for a long time ago,” reach the very limit of legality. In the interest of blunt cutting, the government would expose us to the risks of losing arbitrations that would cost us even more as a result.

A modern state should be able to set its priorities and adjust the system of taxation or subsidies according to them. After all, in addition to the task of ensuring the financing of the functioning of the state, taxes also have a regulatory role.

By setting them, governments say which activities or consumption are more and which are less necessary or beneficial to society. If the government resigns from this role of taxes, it means that it has degraded the tax system to a mere accounting exercise instead of a full-fledged policy.

The government called its package “Czech Republic in Form”. Apparently, however, this is a form whose shape no one thought about. The government is not going to use the setting of taxes for the actual formation of priorities, many of which it directly wrote down in its program statement. The package is more proof that the government itself is not very good in terms of modernizing our country and thinking about the future.