Who Pays Taxes and Who Gets Benefits in the Czech Republic
|Author(s):|| doc. Ing. Ondřej Schneider MPhil., Ph.D., Ondřej Schneider|
|Type:||IES Working Papers|
|ISSN / ISBN:|
|Published in:||IES WP 2004/68|
|Keywords:||tax policy, social policy, income distribution, tax burden|
|JEL codes:||H2, I3|
|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.
JEL Classification: H2, I3
Keywords: tax policy, social policy, income distribution, tax burden.