News & Events

New tax impact study

Daniel Münich and Klára Kališková collaborated on the latest IDEA study titled "Who Will Benefit From the Proposed Increase to Child Tax Credit?"

The authors estimate that such a tax credit, if fully implemented, would annualy require additional 4.7 billion CZK to be allocated from the state budget.

• This study assesses the consequences of increasing child tax credit for the second child in a family by 500 CZK per month, and for the third and further children by 900 CZK per month, as proposed by the Czech government in late May 2014. This raise is planned to take place in three steps and would be complete in 2017.
• The proposed changes would reduce tax liability for approximately one fifth of non-retired households. An average household with more than one child would save c. 7 300 CZK per year.
• The poorest households with multiple children would save on average only 2 900 CZK per year, whereas the richest multi-child households would be better off by 7 000 to 9 000 CZK per year.
• Nearly one third of the total budgetary costs of the proposed changes (1.5 billion CZK per year) would be spent on supporting multi-child families in the upper half of the income distribution. 
• The proposed raise would result in an increase in the already high tax differential between men and women, and would increase the disparity in taxation levels between childless individuals and married couples with children. In a country that holds the record (among OECD countries) level of disparity in net taxes paid between unmarried childless individuals and married individuals with a dependent spouse and two children, that disparity would be further increased.

A longer summary can be downloaded from the IDEA website.