{"id":7346,"date":"2020-11-04T00:00:00","date_gmt":"2020-11-03T23:00:00","guid":{"rendered":"https:\/\/www.rozpoctovarada.cz\/statement-of-the-czech-fiscal-council-concerning-the-amendment-doing-away-with-super-gross-wage-taxation-and-loosening-the-fiscal-rules-set-out-in-the-act-on-budgetary-responsibility-rules\/"},"modified":"2022-12-31T06:19:38","modified_gmt":"2022-12-31T05:19:38","slug":"statement-of-the-czech-fiscal-council-concerning-the-amendment-doing-away-with-super-gross-wage-taxation-and-loosening-the-fiscal-rules-set-out-in-the-act-on-budgetary-responsibility-rules","status":"publish","type":"post","link":"https:\/\/www.rozpoctovarada.cz\/en\/statement-of-the-czech-fiscal-council-concerning-the-amendment-doing-away-with-super-gross-wage-taxation-and-loosening-the-fiscal-rules-set-out-in-the-act-on-budgetary-responsibility-rules\/","title":{"rendered":"Statement of the Czech Fiscal Council concerning the amendment doing away with super-gross wage taxation and loosening the fiscal rules set out in the Act on Budgetary Responsibility Rules"},"content":{"rendered":"\n<p>On 26 October 2020, House Document No. 910 was\npublished on the website of the House of Deputies, containing an amendment put\nforward by Member of Parliament Andrej Babi\u0161, concerning the government draft\nact amending certain acts in the sphere of taxation and certain other acts.&nbsp; The substance of the amendment lies in doing\naway with the taxation of the super-gross wage and further loosening budgetary\nresponsibility rules.<\/p>\n\n\n\n<p>With\nrespect to the amendment, the CFC states the following: <\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>The amendment\nof the Act on Budgetary Responsibility Rules confirms that the proposed doing\naway of the taxation of super-gross wage as well as the set-up of the\ngovernment budget for 2021 do not comply with the structural balance limits set\nby the current text of the Act.&nbsp;\nFollowing the spring loosening that shifted the structural balance limit\nfor 2021 to -4% of GDP, however, the Act already gives the government\nsufficient room for an active fiscal policy.&nbsp;\nIn the CFC\u2019s opinion, further deepening of the fiscal imbalance is\ntherefore not required at this point.<\/li><li>Given\nthat the government budget proposal for 2021 as approved by the government\nassumes a structural balance of -4.5% of GDP, doing away with the taxation of the\nsuper-gross salary with the parameters proposed would result in a further\ndeepening of the structural deficit to approximately 6% of GDP. &nbsp;If subsequent consolidation of 0.5% of GDP per\nyear were done (as the amendment assumes), the original limit of structural\nbalance, of -1% of GDP, would only be achieved in 2031.<\/li><li>Such a\nloosening of fiscal policy would result in a long-term increase of the debt\nquota that would peak around 2027, when the debt brake limit would be reached (55%\nof GDP).&nbsp; If, however, public sector\nfinances in 2020 came out with a result worse than that foreseen by the current\nmacroeconomic prediction, which may be seen as highly likely, with a view to\nthe restrictive measures taken in connection with the second wave of the\nepidemic, the debt brake limit would be reached even earlier.&nbsp; Analysis in June of this year had estimated\nthat Czech public finance would reach the debt brake point in approximately 2043.<\/li><li>The\nform of the amendment as well as the method of its submission constitute\nserious violations of elementary rules of the budgetary process: the government\nhas already approved the draft 2021 budget, which does not plan on such a\nsignificant intervention in public processes.&nbsp;\nThis constitutes a breach of the principle of that the budget be complete\nand correspond to reality.<\/li><li>The\nfact that the Act on Budgetary Responsibility Rules is so seriously altered by\na parliamentary amendment, points to the dismal and irresponsible approach of\nthe government to the institute of fiscal rules.&nbsp; Such a fundamental change should have passed\nthrough the standard legislative process, been discussed with relevant\nstakeholders (including the CFC) and featured a well-worked-out macroeconomic\nimpact analysis.&nbsp; In addition the material\nis of poor quality in formal terms, as well \u2013 containing both factual and\nformal errors.&nbsp; <\/li><li>The\nproposed reduction of individual income tax will also have a significant impact\non municipal and regional budget income.&nbsp;\nAn outage of around CZK 20 bn can be expected for the former, CZK 7 bn\nfor the latter.&nbsp; Municipalities and\nregions cannot be expected to reduce their operating expenses to such a degree,\nor secure sources by increasing their indebtedness.&nbsp; The consequence of the step will thus be a\ndrop in their investment activity, with an adverse impact on aggregate demand\nand on the rate of recovery of the country\u2019s economy. <\/li><li>The\nrationale of the amendment states that the income tax reduction is intended to\napply for two years and that the final tax regime and rates would be decided\nupon based on current economic and fiscal developments.&nbsp; The amendment of the Act does not, however,\nset out any mandatory review after two years.<\/li><li>The\nmethod chosen for alleviating the tax burden on individuals cannot be considered\nappropriate, from the macroeconomic point of view, if it is to lead to\nstimulating consumer demand.&nbsp; From the\npoint of view of net income, more will be gained by higher-income households, which\ncan be expected to save a significant portion of their extra income, which\nmeans that the funds will not be moved back to the real economy. <\/li><\/ul>\n\n\n\n<p>Based on the above, the CFC does not recommend\nadopting the proposed regulation of individual income tax and of the Act on Budgetary\nResponsibility Rules, as it would fundamentally deepen the imbalance of public\nfinance and not yield any significant positive impact on the economic situation\nin the Czech Republic.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>On 26 October 2020, House Document No. 910 was published on the website of the House of Deputies, containing an amendment put forward by Member of Parliament Andrej Babi\u0161, concerning the government draft act amending certain acts in the sphere of taxation and certain other acts.&nbsp; The substance of the amendment lies in doing away&#8230;<\/p>\n","protected":false},"author":3,"featured_media":7114,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-7346","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Statement of the Czech Fiscal Council concerning the amendment 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October 2020, House Document No. 910 was published on the website of the House of Deputies, containing an amendment put forward by Member of Parliament Andrej Babi\u0161, concerning the government draft act amending certain acts in the sphere of taxation and certain other acts.&nbsp; The substance of the amendment lies in doing away...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.rozpoctovarada.cz\/en\/statement-of-the-czech-fiscal-council-concerning-the-amendment-doing-away-with-super-gross-wage-taxation-and-loosening-the-fiscal-rules-set-out-in-the-act-on-budgetary-responsibility-rules\/\" \/>\n<meta property=\"og:site_name\" content=\"N\u00e1rodn\u00ed rozpo\u010dtov\u00e1 rada\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/narodnirozpoctovarada\" \/>\n<meta property=\"article:published_time\" content=\"2020-11-03T23:00:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-12-31T05:19:38+00:00\" \/>\n<meta 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