The impacts of reintroducing the concept of gross wages as a tax base of personal income tax in the Czech Republic

Dopady znovuzavedení koncepce hrubé mzdy jako základu daně z příjmů fyzických osob v ČR

Alena Vančurová and Stanislav Klazar

Český finanční a účetní časopis, 2017, vol. 2017, issue 1, 53-69

Abstract: Using analytical tool "safely untaxed tax base" we estimate redistributive impact of proposed changes in personal income taxation based on the plans of the Czech Social Democratic Party. We also compare impacts of other potential variants of changes in the basic elements of tax technique (reintroduction of the concept of gross wages, changes in the structure of nominal rates, adjustments in the basic personal tax credit). According to the legislation in 2017, 25 % of employees do not pay income tax due to the generous tax credit (and 72 % of all self-employed persons). Returning to the tax system of 2007 (which was based on the concept of "gross wage", lower tax credit and progressive tax rates) would lead to a significant reduction in the number of people with zero tax (as a result there would be only a few percent). By using the knowledge of behavioral economics, it can be deduced that this may lead to more significant efforts for more intense tax planning. Far-reaching and hardly predictable social or retirement consequences can be deduced.

Keywords: Super-gross wage; Gross wage; Tax base; Personal Income Tax; Tax reform; Tax incidence; Incidence of Social security contribution; Safely untaxed tax base; Superhrubá mzda; Hrubá mzda; Základ daně; Daň z příjmu fyzických osob; Daňová reforma; Incidence daně; Incidence pojistného; Bezpečně nezdaněný základ daně (search for similar items in EconPapers)
JEL-codes: H22 H23 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.18267/j.cfuc.492

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