What is good to know
Families with minor children are more of the losers who will not be helped much by Babiš’s reform.
Employees who take half the average wage will improve by 900 crowns a month, those who earn twice the average can look forward to an additional 3,600 crowns a month.
At least half a million households do not pay any income tax at all.
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We help families the most in Europe and we will help them even more. With these words, the prime minister and ministers sometimes promote their family policy, but the planned tax cuts do not follow this rule.
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If the income tax rate is really reduced to 15 percent of gross wages, as promised by Andrej Babiš, people with above-average incomes earn the most, while poorer families with children will only remain on their own.
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Babiš intends to abolish the super-gross wage and instead calculate personal income tax again according to the gross wage. However, it will keep another unique feature in the tax system, which was introduced by Topolánek’s government in 2008.
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The uniform rate is not completely unusual, which today reaches 20.1 percent of the gross wage for everyone, but of the comparable countries, the Czechia has the largest discounts, which the taxpayer can deduct from the tax for himself, his wife or husband in the household, or for children. They are so large that at least half a million households pay no tax at all and can claim a tax bonus.
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Despite the uniform rate, this creates a system with an unusually steep progression. If today an employee with twice the average wage has to pay seventeen percent of his income in real terms in taxes, the one with half the average wage pays only eight percent. Discounts for children have a great influence. If a worker with half the average wage has two minor children and a housewife, then he pays nothing, but still receives from the state an amount of sixteen percent of his wage as a bonus.
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Favoring poor families and especially families with small children is possible only by the fact that Babiš’s reform will deepen the progress and thus the difference between rich and poor. However, this cannot be achieved by reducing the tax rate. The rate for most employees will be reduced by about the same five percent, and naturally those with higher earnings will benefit more. An employee with half the average wage will improve by 900 crowns a month, his colleague with twice the average can look forward to an additional 3,600 crowns a month (see table below).
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Families on the other dorm
The reform does not forget about the families of employees with children. If half of them, ie about 550 thousand, have not yet paid taxes and collected bonuses, another quarter, ie 200-300 thousand, will stop paying taxes. Even those who collect an average or slightly higher salary from the employer will not pay personal income tax for a year. Nevertheless, families with minor children are generally among the losers, ie those who did not help Babiš’s reform much, if it helped at all. Bonuses for children are set in the relevant law by the exact amount, and if poorer families draw most of this bonus today, their contribution from the state will increase only minimally. In families where the breadwinner takes half of the average wage, assistance from the state will not increase by a crown.
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Prime Minister Andrej Babiš and Minister of Finance Alena Schillerová are currently saving money by saying about the planned tax reform. “The new rules for calculating personal income tax would only apply to income generated in 2021,” the Ministry of Finance answers the question List of Reports. In addition, the office admits that it works with several variants and “one of them is the introduction of a single personal income tax rate of both 19 and 15 percent,” said Tomáš Weiss from the ministry. At the same time, the Prime Minister recommended the 15% rate.
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Although the opposition Pirate Party is proposing to change – specifically increase – tax rebates, Minister Schiller’s officials have previously stated that something like this is not planned.
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