Journal of Tax Reform
Quo Vadis Tax and Levy Burden of Wages in the Czech Republic? Tax Reform in 2022
M. Krajňák
VŠB-Technical University of Ostrava, Ostrava, Czech Republic; Moravian Colleague Olomouc, Olomouc, Czech Republic
Abstract
The article deals with changes in personal income taxation in the Czech Republic in 2022 and their impact on the tax burden. The article also deals with the levy burden represented by payments for social security contributions. An extensive tax reform changing the method of taxation of income from dependent activities took place in the Czech Republic in 2021. Its continuing effects was added with impact of legislation changes after 1 January 2022. The most significant change is the increase in the taxpayer’s relief by CZK 3,000. The assessment of how these changes affect the tax burden was made by calculating the effective tax rates. The research methodology includes methods of regression and correlation analysis and methods for time-series analysing. The average wages used by the Czech Social Security Administration for the purposes of calculating social security contributions were used for the analysis. The results show that the tax burden has decreased since 2022 if basic taxpayer relief is applied. For the taxpayer, who, in addition to the taxpayer’s relief, also claims a tax credit for children, the tax burden increases slightly. Although in most cases, the income is subject to the nominal linear tax rate, in comparison with the previous year, there is an increase in the progressivity of the personal income tax due to the rise of the tax relief per taxpayer. On the other hand, social security contributions are both nominally and real linear. There are no significant reforms in this area in comparison with the tax burden. Due to the decrease in the tax burden, in some cases, the levy burden of social security contributions is higher, even though their nominal rate is lower than the nominal income tax rate.
Keywords
Czech Republic, effective tax rate, personal income tax, social security contribution, tax burden, tax reform, tax credit, tax relief for taxpayer
JEL classification
C10, H24, K34References
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Acknowledgements
This paper is an output of the science project SGS SP2022/1.
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; Associate Professor, Department of Business Economy and Management, Moravian Colleague Olomouc (Třída Kosmonautů 1, 709 00) Czech Republic; ORCID: https://orcid.org/0000-0003-4924-3583; email: michal.krajnak@vsb.cz
For citation
Krajňák M. Quo Vadis Tax and Levy Burden of Wages in the Czech Republic? Tax Reform in 2022. Journal of Tax Reform. 2022;8(1):25–39. doi.org/10.15826/jtr.2022.8.1.106
Article info
Received January 2, 2021; Revised February 6, 2022; Accepted April 2, 2022
DOI: https://doi.org/10.15826/jtr.2022.8.1.106
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