On May 23, the Government passed a complex amendment to several Acts on Taxes and Taxation. The aim of the amendment is to cut a budget deficit under 2,9 per cent of the GDP in 2013, 1,9 per cent in 2014 and 0,9 per cent in 2015. Generally, the Government intends to impose a higher degree of direct taxation. The main changes include a decrease of expenditure rate applicable to income tax abatement, an increase of income tax levied on Czech non-residents, and an increase of income tax of 7 per cent in the high-income range (the so-called increase of solidarity). Except for those measures, the Government passed a proposal of an increase of VAT to 21 per cent. The amendment is heading to the Chamber of Deputies; the measures should come into force in January 2013. However, some measures are temporal and they will cease to exist in 2016.
For further information, click here (information sites of the Government of the Czech Republic). Information regarding changes of the tax system, see here (explanatory report of the amendment).
Simultaneously, the Government approved an amendment to the Act on Tax Transfers. According to the Act, tax revenue (VAT, Income Tax of a natural person) should be divided among the state budget and both a regional and a municipal budget. A precisely defined share out of the revenue should be returned back to the municipality and region where the tax has been paid:
- 19,93 per cent of gross VAT, 21,4 per cent of gross Income Tax to a municipality;
- 8,29 per cent of gross VAT, 8,92 per cent of gross Income Tax to a region.
For a long time, the division of the revenue has been transferred in favor of bigger cities; smaller cities and municipalities have been underfinanced by the state budget. The biggest cities in the Czech Republic (i.e. Prague, Brno, Ostrava, Pilsen) should be shortened their allowance from the state budget of approximately 1,1 billion CZK.
For further information, click here (information sites of the Government of the Czech Republic). Information regarding the division of tax revenue, see here (explanatory report of the amendment).
5th March 2019