6th April 2017

OECD's Taxation and Skills Study: In Czech Republic, future expected income tax revenues more than cover costs of skills for government

The OECD's Taxation and Skills Study measures how tax and spending policies impact financial incentives to invest in skills, and how the costs and returns to skills are shared between students and governments.

The costs of skills investments for students include tuition fees and the earnings foregone in the labour market during periods of study. These costs are offset by scholarship and grant income, by reduced taxes on lower levels of income during periods of study, and by tax expenditures that reduce the costs of skills such as tax deductions and credits for skills expenses. The returns to skills considered in the study are the higher wages students can earn after education.

For a typical 17-year-old university student undertaking a four-year degree in the Czech Republic, the Average Effective Tax Rate on Skills is 18.2%, the 17th highest value in the 29 OECD countries considered in this study, OECD says.

The Breakeven Earnings Premium measures how much earnings must rise for students to recoup their education costs. In the Czech Republic, earnings must rise by 16.5% for students to break even on a skills investment, the 9th highest value in the 29 OECD countries considered in this study.

The Average Returns to Costs Ratio in the Czech Republic is 1.56 for a student earning an average return on an investment, the 8th highest value in the 29 OECD countries considered in this study. This suggests that future expected income tax revenues more than cover the costs of skills for the government, and that further education spending may be self-financing in terms of future income tax revenue.

View more details here. Country report for the Czech Republic is available here.


Members of the American Chamber of Commerce in the Czech Republic