The planned tax package is provoking heated debates. In the shadow of debates about the abolition of the super-gross wage or the increase in the tax credit for the taxpayer, another controversial topic remains – the new taxation of income from the sale of securities and shares in joint-stock companies. The Pirates received this in the tax package approved by the Chamber of Deputies in the form of amendments.
In the Czech Republic, a tax exemption now applies to the sale of securities. Income from the sale of shares, bonds or participation certificates is exempt from tax if more than three years have elapsed between their acquisition and sale.
The proposal of the pirate MP Mikuláš Ferjenčík removes this exception and introduces progressive taxation of capital income in the range between 15 and 23 percent. It does not only apply to an annual income of up to CZK 20 million for one taxpayer.
But the novelty is criticized by investors and economists. They fear less interest in setting up joint stock companies, an outflow of investment and stifling innovation. The Minister of Industry and Trade and Transport, Karel Havlíček, also disagrees with the new tax regulation. The tax package is still pending in the Senate, and Havlíček intends to persuade senators to delete changes in securities taxation.
“It’s completely against promoting healthy entrepreneurship, starting and selling companies. These are all capitalist tools that make it possible to create new values and innovations. I therefore find the pirate proposal unacceptable. But I believe that it will still be fixed, “Havlíček said at the Forbes Better Czechia conference.
It drains money rather than brings it
Also, according to investor Ondřej Tomek, the new taxation will drain money from the Czech Republic instead of the promised increase in revenues to the state budget.
“The revenue is to be two billion crowns. But I don’t really believe it. A budget hole of hundreds of billions (which will cause the adoption of the tax package as a whole, note. editorial staff) does not work. In addition, it undermines the innovative economy, whose engine is just equity. The damages will be significantly higher than the benefits, “says Tomek.
According to him, this will discourage entrepreneurs from founding joint-stock companies, ie more advanced forms of companies that may eventually go public. “If the state has a large share of successful companies on the stock exchange, it significantly increases its access to innovative capital. The new taxation will thus further slow down the already fading capital market in the Czech Republic, “says Tomek.
It also bothers him that the Pirates pushed the topic into the tax package without a broader society-wide discussion. At the same time, they argue for tax justice. Ferjenčík added that he does not understand why normally working people should pay high wage taxes, while the richest investors should pay nothing from capital income.
According to the co-owner of the RSJ financial group, Václav Dejčmar, the taxation of investments cannot be perceived in the same way as the taxation of labor.
“It is generally better to leave as much money as possible to capable entrepreneurs and investors who have already built something to continue investing and creating value. It is not the state or politicians, but these ‘Bats’ who take risks, innovate and ensure the prosperity of the country. They have already taxed their money in their companies and it is not smart to tax it again for successfully selling their business, “says Dejčmar.
According to him, the new taxation of natural persons will only achieve that no one will hold large shares in companies directly, but always through the company.
“At the corporate level, both the sale of shares and income from dividends are exempt from income tax in the Czech Republic. In other countries, conditions are even better, with income tax exemptions generally motivating companies to invest. Therefore, the additional tax collection from the new measure will be negligible, “points out Dejčmar.
He is also bothered by the high proposed tax rate. In practice, for example, entrepreneurs who have built a company from scratch and decided to sell it would have to pay 23 percent of the majority of the amount obtained to the state.
He had to figure it out one day
The founder of Jet Investment, Igor Fait, does not agree with this amount either. “If there should be any taxation, it is at the level of the dividend, ie 15 percent, not 23 percent,” says Fait.
He also does not like the fact that the proposal only concerns public limited companies and not a limited liability company, and that it affects shareholders retroactively. “When you make personal cash flow, you do not expect that income from shares will be taxed after three years. In my opinion, this should only apply to shares that you have just acquired, “notes Fait.
He hopes that the proposal in the Senate will still be stopped or changed. However, he adds that the abolition of the tax exemption – the so-called time test – must have taken place once, even though he does not like the form of taxation. “No time test is common abroad. If we want to approach the world standard, we will have to waive the tax exemption, “says Fajt.
According to Trinity Bank chief economist Lukáš Kovanda, however, there is a big difference between the Czech Republic and abroad. “Securities taxation is relatively common in Western Europe. However, these countries, of which the Pirates are following their example, have accumulated capital and can afford a slightly different composition of total taxation than the Czechia. Unfortunately, we do not have such a strong capital and we are not so developed, “Kovanda points out.
According to him, the Czechia is therefore not in a phase where it could afford such a measure. Instead of moving closer to the most advanced economies, it would rather slow down its growth. “It is not a sensible move. We shoot it in the leg. We need to encourage investment and accumulate capital. And this is contrary to our goal of ceasing to be just an assembly plant and moving to a higher level, “says Kovanda.
Tax justice is a good goal, but not now
Economist Filip Matějka from CERGE-EI also considers the new taxation of securities to be risky at the moment.
“I certainly would not be implementing it right now, in times of crisis and chaos. It is a well-intentioned pursuit of greater justice, but it could cost us dearly at the worst possible time. We do not know how much capital investors would instantly send elsewhere. And I don’t just mean other countries or tangled companies. Instead of buying newly taxed startups, for example, they can push even more for real estate prices that are not covered by the change, ”says Matějka.
According to him, two of the biggest problems of the current crisis are uncertainty and the fact that no new companies are being established. According to him, a pirate proposal would increase uncertainty even more and start-up entrepreneurs would have a harder time raising money. “The non-emergence of new companies is the same trouble as the bankruptcy of old, if not greater. For example, in the USA, the youngest companies, which employ only one-seventh of all people, are responsible for three-quarters of all growth, “describes Matějka.
He adds that setting up a tax system more fairly is very important, but more needs to be thought about. In addition, he said, the change would have to be more complex and come in a quieter time.
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