Tax and Benefit Reform in the Czech and Slovak Republics

Christopher Heady and Stephen Smith

No 1151, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper analyses the changes to the tax and social security systems that have occurred since Czechoslovakia's `velvet revolution' in 1989. It shows how the tax system is moving to meet the requirements of a market economy. It suggests that a particularly high priority has to be given to avoiding taxes which require administrative discretion and to reducing administrative complexity.A tax-benefit model is used to look at two particular aspects of tax and social security design. It shows that the administratively convenient move to a single-rate VAT could have been achieved without adverse distributional effects, but with a slight increase in overall marginal tax rates. It also analyses the effects of the Czech plan for replacing universal benefits with means-tested benefits. This is shown to reduce budgetary costs and reduce poverty, but at the expense of increasing marginal tax rates.

Keywords: Czech Republic; Fiscal Policy; Social Security Benefits; Tax Reform (search for similar items in EconPapers)
JEL-codes: H23 H24 H55 (search for similar items in EconPapers)
Date: 1995-03
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Citations: View citations in EconPapers (2)

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