Govt coalition agrees on two income tax rates, 15 and 23 pct

Ruling parties Social Democrats (CSSD) and ANO agreed on abolishing the "super-gross wage" and introducing a 15-percent income tax rate, while maintaining the 23-percent rate for people with monthly income above Kc139,000, Prime Minister Andrej Babis said at a press conference.

The ruling coalition had promised to abolish the super-gross wage in the government manifesto. The government would like to push through the change in Parliament so that it could take effect as of next year. According to Babis, the abolition of the super-gross wage and the introduction of two income tax rates will lower budget revenues by about Kc74bn, and the 2021 budget draft will take this into account.

The super-gross wage forms the income tax base. It consists of an employee's gross wage plus health and social security payments. The effective income tax rate is currently 20.1 percent. The ruling coalition also agreed today that pensioners should get a one-off contribution of 5,000 crowns to their pension in December. According to the Czech Fiscal Council, the higher rise of pensions and the abolition of the super-gross wage without adjusting other parameters would endanger the long-term and medium-term public finance sustainability.

According to the Chamber of Commerce, the abolition of the super-gross wage should have been connected with lowering of mandatory insurance payments rater than by the lowering of tax income rates. The chamber nevertheless said it welcomed the step. "The resulting reduction of the tax burden cannot be viewed negatively," chamber spokesman Miroslav Diro said. The Czech Republic should lower the overall tax burden on employees, as it is one of the highest in the world, he added.

The Confederation of Industry fears the drop in budget revenues may lead to higher taxation of companies or restriction of investments in the future, its economy policy section head Bohuslav Cizek said. "The re-introduction of progressive taxation and two rates will allow most employees to save hundreds or thousands of crowns on taxes monthly," PwC tax expert and partner Tomas Hunal said. On the other hand, the change will increase the tax burden of people who have additional income that together with their main income exceeds the threshold for the 23-percent rate, he added.

Source: ČTK

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