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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.

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Bibliographic Info

Paper provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its series Working Papers IES with number 68.

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Length: 14 pages
Date of creation: 2004
Date of revision: 2004
Handle: RePEc:fau:wpaper:wp068

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Related research

Keywords: tax policy; social policy; income distribution; tax burden;

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Cited by:
  1. Petr Jansky, 2013. "Consumer Demand System Estimation and Value Added Tax Reforms in the Czech Republic," IFS Working Papers W13/20, Institute for Fiscal Studies.
  2. Martin Guzi, 2013. "An Empirical Analysis of Welfare Dependence in the Czech Republic," Discussion Papers 16, Central European Labour Studies Institute (CELSI).
  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, Research Department.
  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.

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