Although its prognosis is unclear because of the ruling government’s lack of a firm majority in parliament, the Czech government has unveiled its flat tax. Combined with reductions in social welfare spending, the tax reform could dramatically boost Czech competitiveness and put more pressure on Western Europe’s welfare states. Tax-news.com reports:
The Czech government has announced a raft of major tax reform plans, which include a flat tax on personal income, a significant reduction in tax on corporate income, and changes to the value‐added tax regime. Under the proposals announced by Finance Minister Miroslav Kalousek, if approved Czech taxpayers will pay a 15% flat tax on their personal income, while companies will see their income tax rate drop to 19% from the current 24% by 2010. At present personal income tax rates vary according to wages, and range from 12% to 32%. The lower rate of value‐added tax will increase under these reforms to 9% from 5%, but the headline rate will remain unchanged at 19%. …with the tax cuts accompanied by some major cuts in welfare spending, such as unemployment benefits and healthcare, the government is sure to encounter opposition from the left.