Income Taxes and Benefits among Czech Employees: Changes since 1989 and a Cross-National Comparison

Abstract

In 1993-1995 restricted and more transparent forms of income redistribution replaced the extensive and hidden redistribution under the command economy. Macroeconomic data on the Czech Republic show a very slow decrease in the rate of redistribution (the so-called consolidated tax quota) from the early 1990s to 2002, but a slight increase since then (currently at 38 percent of GDP, slightly below the average of European OECD countries). It is certainly not enough to speak only of averages and aggregates. It is important at the same time to show the redistributive flows and the social identities of taxpayers and benefit recipients. The question is how taxes and benefits interact in shaping household income, and what the net effect of redistribution is. In a continuation of our previous research, we use here income surveys (Microcensus) to show the joint effect of taxes and transfers on the distribution of household income. The paper is organized as follows: In the first part, data, samples and indicators are presented and explained. In the second part, data on Czech employee households are used to analyze the change in redistribution and the relevant factors for the period between 1988 and 2002. In the third part, the Czech Republic is compared with other OECD/EU countries in terms of redistributive flows. In the fourth part, several recent reform proposals for the distribution of income are tested.