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: Who Pays Taxes and Who Gets Benefits in the Czech Republic

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Abstract

In this paper, we summarize our previous research into the distributive effects of the tax and social systems in the Czech Republic. We construct a measure of the total tax burden for ten income deciles and we measure it against social benefits distribution. Our analysis shows that the poorest decile gains significantly from the combined tax and social systems, as its income is lifted by almost a quarter, income of the five richest deciles is cut by approximately 40%. This highly progressive nature of the Czech system is due to the fact that poorest households pay very low direct taxes (including social security contributions) and consume most of social benefits. This combination creates a substantial poverty trap for poorest households. Only regressive parts of the whole system are consumption taxes (excise taxes and to a larger extent value added tax). Our analysis, thus, confirms a high level of redistribution of income and strong disincentives for labor market participation of low-income groups in the Czech Republic.

Suggested Citation

  • Ondřej Schneider, 2004. ": Who Pays Taxes and Who Gets Benefits in the Czech Republic," Working Papers IES 68, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2004.
    • Handle: RePEc:fau:wpaper:wp068
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    Citations

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    Cited by:

    1. Petr Janský, 2014. "Consumer Demand System Estimation and Value Added Tax Reforms in the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(3), pages 246-273, June.
    2. Tatiana Chudá & Petr Janský, 2016. "The Impact of a Fat Tax: Progressive in Health, but Regressive in Income?," Prague Economic Papers, Prague University of Economics and Business, vol. 2016(4), pages 445-458.
    3. Kamil Galuscak & Jan Pavel, 2007. "Unemployment and Inactivity Traps in the Czech Republic: Incentive Effects of Policies," Working Papers 2007/9, Czech National Bank.
    4. Kamil Galuscak & Jan Pavel, 2012. "Taxes and Benefits: Work Incentive Effects of Policies," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(1), pages 27-43, February.
    5. Petr Janský & Klára Kalíšková & Daniel Münich, 2016. "Does the Czech Tax and Benefit System Contribute to One of Europe’s Lowest Levels of Relative Income Poverty and Inequality?," Eastern European Economics, Taylor & Francis Journals, vol. 54(3), pages 191-207, May.
    6. Martin Guzi, 2014. "An Empirical Analysis of Welfare Dependence in the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(5), pages 407-431, November.

    More about this item

    Keywords

    tax policy; social policy; income distribution; tax burden;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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