The Tax System in the Czech Republic: Is There a Need for Reform?

Tax Policy Conference, p. 549, 2003

20 Pages Posted: 3 Jun 2012

See all articles by Ivan Matalík

Ivan Matalík

Czech National Bank (CNB)

Michal Slavik

European Central Bank (ECB) - Directorate General Economics

Date Written: April 3, 2003

Abstract

The paper by Ivan Matalík and Michal Slavík examines the problems and prospects of the Czech tax system in the context of the growing integration of the country with the European Union. The paper briefly outlines the evolution of the system since it was set up in the early Nineties. At that stage, the main concern was that of designing tax rules compatible with a market economy. Several factors now call for a reform of the Czech tax system. First of all, there is a need to reverse the decline of revenues and reduce the current fiscal imbalances. The authors stress that this action should be complemented by tighter spending control. The reform should also aim at rationalising the funding of the different levels of government and at limiting the role of off-budget funds. There is also a need to adjust the tax system to the increasing openness of the economy, which is limiting the government’s control of tax bases. Taxation has become one of the main factors affecting the competitiveness of the country. In this context, the burden of taxation on labour should be reduced. At present this burden discourages work in the regular economy. The complexity of the tax system, which depends on several incremental changes introduced in legislation over the last decade should also be tackled. Simplification would reduce administration costs and close opportunities to avoid taxation. Finally, tax reform should also aim at strengthening automatic stabilisers.

Suggested Citation

Matalík, Ivan and Slavik, Michal, The Tax System in the Czech Republic: Is There a Need for Reform? (April 3, 2003). Tax Policy Conference, p. 549, 2003, Available at SSRN: https://ssrn.com/abstract=2073437

Ivan Matalík (Contact Author)

Czech National Bank (CNB) ( email )

Na Prikope 28
CZ-11503 Praha 1
Czech Republic

Michal Slavik

European Central Bank (ECB) - Directorate General Economics ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

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