(Repeats story published late on Wednesday)
* Pension reform key in forming new government
* Mandatory private savings, lower social tax, higher VAT
* Left rejects the plan
By Jana Mlcochova and Roman Gazdik
PRAGUE, June 9 (Reuters) - An expert panel proposed a radical overhaul of
the Czech pension system on Wednesday, handing a ready-made plan to politicians
who will need to give pension reform priority.
The three centre-right parties likely to form the next cabinet after a May
28-29 election welcomed the plan, drafted by private and public sector
economists working under the auspices of the finance and social affairs
ministries.
The Czech Republic is the only country in central Europe that has not yet
reformed an increasingly costly pay-as-you-go system, which puts pressure on the
budget as the population ages and fewer people work due to demographic trends.
"The best time to reform pensions is already gone," said Vladimir Bezdek,
head of the expert commission.
The commission agreed to introduce a compulsory pension savings scheme to
complement the current system in which wage earners pay the state which
distributes money directly to current pensioners.
The savings would be managed by private pension funds.
A third voluntary pillar of additional private savings, which is already in
place, would be preserved.
The social tax rate would be cut to 23 percent of gross wages from 28
percent, which would lower labour costs and raise people's income.
Out of the 23 percent, 3 percent would go to the compulsory additional
saving scheme and 20 would continue to go into the pay-as-you go system.
The ceiling for payments of the social tax would be cut to 3 times the
average wage, from 6 times the average.
The shortfall -- in dozens of billions of crowns per year -- coming from the
lower rate would be financed from unifying two current value added tax rates of
10 percent and 20 percent, at 19 percent, and by delaying the retirement age.
PARTIES YET TO AGREE
The central European country may get the strongest and most reform-minded
government since the early 1990s if the right-wing Civic Democrats, the
conservative TOP09 and the centrist Public Affairs make a deal.
Civic Democrat leader and the likely next Prime Minister, Petr Necas, backed
the plan.
"We would eventually be prepared to support it as it was written but of
course we have to lead political talks on that," Necas told reporters.
TOP09 deputy chairman Miroslav Kalousek said the party had yet to debate the
proposals but he liked them, and Public Affairs leader Radek John said there was
a "relatively high level of agreement".
Politicians and experts say the reform should be agreed by a strong
majority, including the leftist opposition, because the new system needs to last
for decades.
The leading leftist party, the Social Democrats, rejected the plan. But the
centre-right coalition would have 118 seats in the 200-seat parliament and may
do it alone.
The state pension account showed a deficit of 1 percent of gross domestic
product last year and Bezdek said that without reform it is likely to remain in
deficit.
The overall public finance deficit was 5.9 percent, and this year's
government target is 5.3 percent.
(Editing by Ruth Pitchford)
