Is a tax hike inevitable?
Staying with the issue of EU membership, one area of legislation that the Czech Republic must bring in line with that of the EU, are taxes. For ordinary Czechs, they already seem too high, but unfortunately, it seems that an even heavier tax burden is yet to come. Vladimir Tax reports:
EU legislation concerning taxes comprises around 150 directives, rules and regulations that will come into effect in the Czech Republic when it joins the Union. At present, the average tax burden per person in the Czech Republic is 22 percent, and combined with social and health insurance, the figure is nearly 40 percent, which is around the European average. However, this is soon to be changed.
The Finance Ministry's tax development outlook suggests that the overall tax burden will increase when the Czech Republic joins the EU. In particular VAT, consumer tax and property tax are bound to rise. Only corporate tax is due to be decreased from the current level of 32 percent, to 25 percent. Income tax for individuals should grow slightly from 32 to 35 percent, but it will be made less progressive. On the other hand, there will be fewer tax allowances.
Some experts warn against excessive taxes, as they may be counter-productive, dissuading people from buying goods or setting up small businesses. David Marek works as an economic analyst for the Patria Finance company: Just a few days ago, the International Monetary Fund warned the Czech Republic against increasing its public finance deficit. The Ministry of Finance admits that the planned hike in indirect taxes will be one way to curb the deficit. However, experts warn that the problem lies in the structure of state expenditures, especially mandatory expenditures, which account for 80 percent of the state budget. Unfortunately, the treasury does not seems to have any intention of reforming them, a step seen as the only real solution to the growing public finance deficit.