Social Democrats weigh progressive tax options

Photo: Tomáš Adamec

Prime Minister Bohuslav Sobotka has made clear that his party, the Social Democrats (leading the current coalition government) would like to raise taxes on employees earning more than 40,000 crowns per month, and lower the burden for those earning less than 30,000 (the equivalent of around 1,100 euros). Large firms could also pay more under a progressive tax rate, the news site iDnes reports.

Photo: Tomáš Adamec
The strongest party in the current government, the Social Democrats, want a “tax revolution,” at least that is how it is described by news website iDnes. Under the plan, taxes could rise for anyone earning more than 40,000 crowns per month as well as for big companies.

Under the reported changes, those earning less than 30,000, would be taxed at 12 percent. Idnes points out that the higher bracket would not affect incomes as a whole but in progressive stages: up to 30,000 would be taxed 12 percent, the next 10,000 crowns, at 15 percent and so on.

The reasoning behind the proposal? Prime Minister Bohuslav Sobotka, the Social Democratic Party chairman, said in a statement that he “wanted Czechs to benefit from the current economic growth and for their wages to be increased”. Last week, iDnes, pointed out, the party indicated they also wanted to tax banks more. According to the news website, the Social Democrats are hoping that employees will welcome the idea as most fit within the lower bracket. The party is floating the idea in an election year; Czechs go to the polls in October.

When it comes to companies, the Social Democrats are considering three brackets: profits up to five million taxed at 14 percent; up to 100 million crowns annually at 19 percent, and over 100 million, at 24 percent. The current rate across the board is 19 percent.

Not surprisingly, the centre-right opposition, including the junior partner in government, the Christian Democrats, are against the proposal. They say charging increased taxes would demotivate employees and would threaten competitiveness. Progressive taxation, the head of the Civic Democrats Petr Fiala told the daily, would complicate the tax system at a time when just the opposite was needed: simplification and stability.