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Further Advancing Pro-growth Tax and Benefit Reform in the Czech Republic


  • Zdenek Hrdlicka
  • Margaret Morgan
  • David Prušvic
  • William Tompson
  • Laura Vartia


In 2008, the Czech government implemented a major overhaul of the personal income tax (PIT), replacing the previous progressive rate schedule with a single 15% rate levied on an enlarged base. This was accompanied by significant changes to the corporate income tax (CIT) and an increase in the concessionary rate of value added tax (VAT) applied to many goods and services. The reform made the tax system more transparent and was broadly consistent with OECD recommendations concerning pro-growth tax reform. These tax changes followed the adoption of significant changes to the benefit system, particularly housing and social assistance benefits, in 2006-07. This paper describes the main elements of these tax and benefit reforms and provides an initial assessment of their impact, with particular emphasis on changes in the effective tax rates of workers and firms. It begins with an overview of the systems and a summary of recent changes. This is followed by an evaluation of those reforms. A final section explores the scope for further reforms in future. This paper relates to the 2010 OECD Economic Survey of the Czech Republic. ( Poursuivre la réforme de la fiscalité et des prestations visant à favoriser la croissance en République tchèque En 2008, le gouvernement tchèque a procédé à une vaste refonte de l’impôt sur le revenu des personnes physiques (IRPP), remplaçant le barème progressif précédemment en vigueur par un taux unique de 15 % prélevé sur une assiette élargie. D’importantes modifications ont aussi été apportées à l’impôt sur les bénéfices des sociétés (IS) et le taux réduit de la taxe sur la valeur ajoutée (TVA) appliqué à de nombreux biens et services a été relevé. La réforme, qui a rendu le système fiscal plus transparent, était globalement conforme aux recommandations de l’OCDE sur la réforme de la fiscalité favorisant la croissance. Ces changements ont fait suite à l’adoption de profondes modifications du système de prestations, notamment de logement et d’assistance sociale, en 2006-07. Cet article décrit les principaux éléments de ces réformes de la fiscalité et des prestations et présente une première évaluation de leurs répercussions, en mettant plus particulièrement l’accent sur l’évolution des taux d’imposition effectifs des travailleurs et des entreprises. Il s’ouvre sur une présentation générale des systèmes et sur une synthèse des changements intervenus récemment. Il expose ensuite une évaluation de ces réformes et s’achève sur une analyse des réformes à envisager. Ce document se rapporte à l’Étude économique de l’OCDE de la République tchèque, 2010 (

Suggested Citation

  • Zdenek Hrdlicka & Margaret Morgan & David Prušvic & William Tompson & Laura Vartia, 2010. "Further Advancing Pro-growth Tax and Benefit Reform in the Czech Republic," OECD Economics Department Working Papers 758, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:758-en

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    Cited by:

    1. 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.

    More about this item


    benefits; carbon tax; corporate income tax; droits d'accise; emissions trading; environmental taxes; excise tax; impôt; impôt sur le revenu; impôt sur les sociétés; labour market; marché du travail; maternity; maternité; personal income tax; prestations; property tax; reforms; réformes; tax; taxe foncière; taxes carbone; TVA; VAT; échange de quotas d'émission;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General


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