The measures will see Czechs pay more taxes on alcohol and medicine, while businesses will also pay higher corporate taxes.
Czech President Petr Pavel has signed into law an economic package of dozens of measures introducing budget cuts and increased taxes designed to keep the ballooning budget deficit under control.
Pavel's signature was the last step before the government proposal — which was approved by parliament — turned into law, meaning Czechs will pay more taxes on medicine and alcohol, in the country renowned for its beer.
Value-added tax will have two rates, 12% and 21%, instead of the current three — 10%, 15% and 21%.
Medicines will move from the 10% rate to 12%, while people will pay 21% VAT on their beloved beer in bars.
Businesses will also pay higher taxes: corporation tax will go up by two points to 21% while property tax for individuals will be also hiked by 1.8 times, as well as the tax on alcohol, tobacco and betting.
Prime Minister Petr Fiala previously said the austerity measures were necessary because the debt was rising at a “threatening” pace. Pavel has said the current situation is unsustainable.
According to the government, the measures should reduce the budget deficit by 97 billion Czech crowns (€3.96 billion) next year and for 2025 by 150 billion.
As a result, the deficit of 3.5% of the gross domestic product expected for this year should drop to 1.8% next year and to 1.2% in 2025.
The package is a compromise reached by Fiala’s five-party ruling coalition that took over after defeating populist Prime Minister Andrej Babiš and his centrist ANO movement in the 2021 parliamentary election.
The opposition condemned the changes and said it planned to take the matter to the Constitutional Court, the highest judicial power in the country, while the labour unions called for a day of protests and strikes on Monday.