Czechs sweeten welfare cuts with flat tax By Jan Cienski in Warsaw Published: April 3 2007 19:27 The Czech government yesterday presented a fiscal reform package intended to slash a growing budget deficit that threatens the country's hopes of joining the euro, while at the same time reducing income and corporate taxes and rationalising some social spending.In order to make trimming the welfare state more palatable, the headline feature of the government's initiative is a plan to introduce a flat income tax rate of 15 per cent, compared to the current progressive system, where rates vary from 12 to 32 per cent.(snip)Other tax cuts include lowering the corporate tax to 19 per cent from 24 per cent by 2010, raising the tax threshold and increasing the deduction for having children.(snip)The flat tax scheme is less generous than it first appears. Because the tax will be imposed on gross income which includes employers social security and health care contributions, the true taxation rate would be closer to 23 per cent.Benefits to be cut include a reduction in baby bonus payments, as well as the ending of some education subsidies and even a funeral subsidy. Some ministries will also have to cut their staffs.
By Jan Cienski in Warsaw
Published: April 3 2007 19:27
The Czech government yesterday presented a fiscal reform package intended to slash a growing budget deficit that threatens the country's hopes of joining the euro, while at the same time reducing income and corporate taxes and rationalising some social spending.
In order to make trimming the welfare state more palatable, the headline feature of the government's initiative is a plan to introduce a flat income tax rate of 15 per cent, compared to the current progressive system, where rates vary from 12 to 32 per cent.(snip)
Other tax cuts include lowering the corporate tax to 19 per cent from 24 per cent by 2010, raising the tax threshold and increasing the deduction for having children.(snip)
The flat tax scheme is less generous than it first appears. Because the tax will be imposed on gross income which includes employers social security and health care contributions, the true taxation rate would be closer to 23 per cent.
Benefits to be cut include a reduction in baby bonus payments, as well as the ending of some education subsidies and even a funeral subsidy. Some ministries will also have to cut their staffs.
The end of the article is clear, thanks to "economists":
However, these reforms only nibble at the welfare state. More comprehensive changes, including pension and health care reform and a claw-back of generous welfare benefits that reduce the incentive to work will only be dealt with in a later package, a delay that some economists have criticized. "2007 may be the best year for economic reforms," said Pavel Sobiek, chief economist for HVB Bank.
"2007 may be the best year for economic reforms," said Pavel Sobiek, chief economist for HVB Bank.
I should say, "economists" and ideologically one-track-minded FT correspondents.
Somehow I don't get the impression the journalist is considering the point of view of poorer people.
