Referring to the current calculations of analysts at her ministry, Schiller specified on Thursday that the real shortfall in public budget revenues should be just over 70 billion crowns, of which 50 billion falls on the state budget.
The governing coalition agreed to abolish the super-gross wage and introduce two personal income tax rates of 15 and 23 percent. Effective taxation for employees now stands at 20.1 percent. As a result, employees will be left with more money from their gross salary. But budget revenues will lose billions of crowns.
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“Of course I can’t say, and I say it openly, that I’ll take it here and make up for it (loss of income). We are simply in a situation where we are in an unprecedented crisis, which can only be compared to the 1930s, “said Schiller.
According to the minister, economic growth is driven by consumption and investment, in which the government is now investing.
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National Budget Council considers the abolition of the super-gross wage and the introduction of two tax rates to be inappropriate in the current economic situation. According to the Council, support from direct government spending is more appropriate to stimulate demand.
In addition, there is a real possibility that households will save a significant part of new income due to the expected unfavorable development of the economy, thus jeopardizing the expected additional VAT and excise revenue that the government expects.
CNB Governor Jiří Rusnok also has doubts
The governor of the Czech National Bank, Jiří Rusnok, also recently stated that, according to him, the reduction of income tax will not lead to people spending more and thus support consumption, which is one of the important components of economic performance. “A large part of people will save the money, which will not kick off the economy,” he added.
ING chief economist Jakub Seidler pointed out that the risk is not the deficit of this year’s state budget, which is planned at 500 billion crowns, but the development in the coming years. It has not yet been specified how the declines in income from the abolition of the super-gross wage or real estate transfer tax will be compensated. “Income shortfalls in the order of tens of billions of crowns will not be easy to find, and high deficits will probably become common practice in the coming years,” he warned.
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