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



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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    References listed on IDEAS

    1. Sandy Dall’erba & Julie Le Gallo, 2007. "The Impact of EU Regional Support on Growth and Employment," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(7-8), pages 324-340, September.
    2. Kneller, Richard & Bleaney, Michael F. & Gemmell, Norman, 1999. "Fiscal policy and growth: evidence from OECD countries," Journal of Public Economics, Elsevier, vol. 74(2), pages 171-190, November.
    3. Mendoza, Enrique G. & Milesi-Ferretti, Gian Maria & Asea, Patrick, 1997. "On the ineffectiveness of tax policy in altering long-run growth: Harberger's superneutrality conjecture," Journal of Public Economics, Elsevier, vol. 66(1), pages 99-126, October.
    4. Gleich, Holger, 2003. "Budget institutions and fiscal performance in Central and Eastern European countries," Working Paper Series 215, European Central Bank.
    5. Urlik Butzow Mogensen & Patrick Lenain & Vicente Royuela-Mora, 2004. "The Lisbon Strategy at Midterm: Expectations and Reality," CASE Network Reports 0058, CASE-Center for Social and Economic Research.
    6. Martin Hallet, 2004. "Fiscal effects of accession in the new Member States," European Economy - Economic Papers 2008 - 2015 203, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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    Cited by:

    1. 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.
    2. Janský & Kalíšková & 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.
    3. 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.
    4. Tatiana Chudá & Petr Janský, 2016. "The Impact of Fat Tax: Progressive in Health, but Regressive in Income?," Prague Economic Papers, University of Economics, Prague, vol. 2016(4), pages 445-458.
    5. 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.
    6. 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.
    7. repec:mes:eaeuec:v:54:y:2016:i:3:p:191-207 is not listed on IDEAS

    More about this item


    tax policy; social policy; income distribution; tax burden;

    JEL classification:

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


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