Journal of Tax Reform
Evaluation the impact of the personal income tax reform in the Czech Republic in 2021 on effective tax rate and tax progressivity
M. Krajňák
VŠB-Technical University of Ostrava, Ostrava, Czech Republic
Abstract
Legislation governing personal income taxation is often subject to changes. A significant personal income tax reform was carried out in the Czech Republic in 2021. The reform implements a progressive tax rate, changes the way the tax base is determined, and increases the tax relief for the taxpayer. The aim of the article is to evaluate the impact of the personal income tax reform on the effective tax rate and tax progressivity. To that end, methods of regression analysis have been used. The source of information for analysis was the data published by the Czech Statistical Office. It was found that in 2021, in comparison with 2020, the tax burden represented in this study by the effective tax rate, in all cases became lower, approximately by 5%. The main reason for this decline is the adjustment of the method of construction of the tax base, which, for the first time in the history of the Income Tax Act, is gross wages. Until the end of 2020, the tax base was a super-gross wage, or the gross wage increased by social security contribution borne by the employer at his costs. The second factor that reduces the tax burden is a CZK 3,000 increase in the deduction per taxpayer per year. This fact increases the degree of tax progressivity, as confirmed by the results of the progressivity analysis and the regression analysis. The changes that have taken place in the personal income tax this year have a positive impact on the taxpayer, but from the point of view of the state, this reform has reduced the state budget revenues.
Keywords
personal income tax, tax reform, effective tax rate, gross wage, tax burden, tax deduction, tax progressivity, Czech Republic
JEL classification
C10; H24; K34References
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Acknowledgements
This paper is an output of the science project SGS SP2020/10.
About Authors
Michal Krajňák – doc., Ing., Ph.D., MBA, LL.M.– Business Economy and Management, Associate Professor, Department of Accounting and Taxes, Faculty of Economics, VŠB-Technical University of Ostrava (Sokolská třída 33, 702 00, Czech Republic); ORCID: 0000-0003-4924-3583; email: michal.krajnak@vsb.cz.
For citation
Krajňák M. Evaluation the impact of the personal income tax reform in the Czech Republic in 2021 on effective tax rate and tax progressivity. Journal of Tax Reform. 2021;7(2):134–145. doi.org/10.15826/jtr.2021.7.2.094
Article info
Received April 10, 2021; Revised June 16, 2021; Accepted August 1, 2021
DOI: https://doi.org/10.15826/jtr.2021.7.2.094
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