Statement regarding the decision - abolishment of the tax-exemption benefits of food vouchers

Some of our clients addressed us in connection with the yesterday's decision of the Czech Republic government in order to find out what would the decision mean specifically for them.
Within this issue, the situation has been quite clear. Currently no changes in law have been in effect and the food vouchers do remain the subject of the tax-exemption benefits for the companies.
The mentioned pass of the proposition by the government is only the first step within the entire legislative process. The proposition must be authorized by a majority of parliamentary votes upon the negotiations in the Czech Republic Parliament. These negotiations are scheduled to begin at the meeting of the Czech Republic House of Parliament in the middle of March 2008.

The opinion of the company of Sodexo Pass ČR a.s. on this issue has been consistent for a long time: this move is a step into a wrong direction, which has not been within interests of any party, i.e. all will have to consider a final loss, the employees, the employers, and as an imminent result, the Czech Republic government as well. The government subsidies for the company food services and related food vouchers represent a few actually effective government contribution tools. They support work productivity and healthier lifestyle of people. They also contribute significantly to the development and stabilization of the food services segment. This all positively projects into the Czech Republic economy.

With regard to the impact of the company food service subsidies on the government budget, according to the Study of the Property Evaluation Institute of University of Economics in Prague, which was conducted early last year, the possible abolition of the tax-exemption benefits for company food services would cause the involved organizations to pay only 1.1 billion CZK more in taxes. However, the government would loose about 1.9 billion CZK from its GDP due to the decreased revenues of restaurants, retail establishments and food-voucher companies. The annual net loss incurred by the government budget of the Czech Republic would be almost 810 million CZK according to the study; and furthermore, the unemployment rate would gradually climb up by one fifth, the same as the revenues of the seventeen thousand restaurants participating in the acceptance of the food vouchers.

The food vouchers and the entire company food services are by no means the Czech Republic specificity, they do function successfully in most of the European states, even in the countries outside of Europe. The experiences from the neighboring countries of the Czech Republic (Slovak Republic, Romania) show, that in the case of recent transitions to their system of "flat taxes", the subsidies of food services have still remained the component of the expenditures being tax-exempted for the employers.