(Repeats story published late on Thursday)
* Govt parties agree voluntary opt-out for those under 35
* Will unify VAT at upper 20 pct rate to cover opt-out gap
* Labour minister says budget impact neutral
* Inflation to see one-off rise
(Adds minister quotes, details, background)
By Roman Gazdik and Robert Mueller
PRAGUE, Feb 17 (Reuters) - Czech centre-right coalition
parties reached agreement on Thursday on the outline of pension
reform, a major part of the cabinet's legislative agenda that
will bring higher taxes and private savings to balance the
system.
The Labour Ministry said a final draft of the plan will be
submitted to the government at its next meeting on Feb. 23.
The Czech Republic has a relatively strong fiscal position
thanks to a healthy banking sector not requiring any bailouts
after the financial crisis, but demographic trends make the
country's fiscal position unsustainable in the long run.
Rating agencies have said successful reforms of the pension,
health and social systems could lead to an upgrade in sovereign
ratings, now at 'A' by Standard and Poor's and 'A1' by Moody's.
The three governing coalition parties agreed on Thursday on
creation of a voluntary opt-out from the pay-as-you-go system
for people under 35, the ministry said in a statement.
Those older than 35 will have until the end of 2012 to
decide on joining the opt-out.
The parties plan to unify value-added tax at the upper rate
of 20 percent to cover the gap caused by the opt-out. Several
food items will be kept at the lower level of 10 percent.
The main part of the reform is that the current
pay-as-you-go system, in which social tax collected from working
people is distributed to current pensioners, will be
complemented by a stronger private-savings component.
Working-age people will be able to divert 3 percentage
points from their social tax, at 28 percent, which will go to
their own individual savings accounts, matched by at least a 2
percent contribution from their salaries.
Finance Minister Miroslav Kalousek told Reuters the plans
for the opt-out would cost the state 20 billion crowns ($1.12
billion) a year once the reform is in place by 2013.
The VAT unification, which could start as early as next
year, would bring 58 billion crowns in revenue per year, Labour
Minister Jaromir Drabek said.
"(The changes) will be neutral in terms of the budget," he
said. "We count on income from state-controlled companies, which
will cover part of the current pension system deficit."
The agreement on a voluntary opt-out is milder than original
calls for a compulsory switch.
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For FACTBOX on planned reforms, click on []
For FACTBOX on political risks, click on []
For ANALYSIS on political situation, click on []
For risks in Hungarian and Polish pensions []
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The centre-right Civic Democrats backed away from compulsory
savings, partly because the effective renationalisation of $14
billion in private pension assets by Hungary's government to
cover public spending has raised uncertainty over policies of
future administrations.
To the north, Poland is also planning to roll back some of
its landmark pension reforms by reducing the contributions that
flow into private accounts so it can raise budget revenues.
Analysts have called for Czech pension system reform for
over a decade to counter the effects of population ageing.
The Czech pay-as-you-go system showed a 29 billion crowns
($1.62 billion) deficit in 2010, about 0.8 percent of gross
domestic product, and the diversion of part of the 28 percent
social tax into savings funds will create a wider gap.
Government studies have predicted the system would
eventually generate deficits growing to around 4 percent of GDP
every year without reform.
Drabek estimated that unifying VAT at the upper rate would
not raise inflation by more than 3 percentage points. The
central bank ignores the primary impact of indirect tax changes
on prices from policymaking, but watches potential spillover
into other prices.
(Writing by Jan Lopatka and Jason Hovet; Editing by James
Dalgleish)
