Czech Republic Joins the Flat Tax Club

Following up on Marian’s earlier post, it’s time to cue up the unofficial theme song of the flat tax revolution and review one of the first English-language news reports about the Czech Republic becoming the 20th jurisdiction to adopt a low-rate flat tax. The Prague Daily Monitor reports that the vote in the Chamber of Deputies clears the only real obstacle to a low-rate tax system:

The cabinet’s package of public-finance reforms passed the final vote in the Chamber of Deputies yesterday thanks to two unaffiliated opposition MPs who voted with the governing coalition. Starting next year, the legislation will gradually reduce corporate and personal-income taxes, cut social spending and introduce cash fees for health care. It still requires Senate approval and President Václav Klaus’s signature, but no resistance is expected from either. …

The reform package will gradually lower the corporate tax rate from today’s 24 percent to 21 percent next year, 20 percent in 2009 and 19 percent in 2010. The existing progressive taxation of personal income at 12 to 32 percent will be replaced by a flat tax of 15 percent in 2008 and 12.5% in 2009. The personal income tax will be calculated from super-gross income, including social and health insurance contributions paid by the employee and the employer. This means effective taxation will be 23.1 percent of gross income in 2008 and 19.4 percent in 2009.