Discussion Paper Details

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Title: Tax and Benefit Reform in the Czech and Slovak Republics

Author(s): Christopher Heady and Stephen Smith

Publication Date: March 1995

Keyword(s): Czech Republic, Fiscal Policy, Social Security Benefits and Tax Reform

Programme Area(s): International Macroeconomics

Abstract: This paper analyses the changes to the tax and social security systems that have occurred since Czechoslovakia's `velvet revolution' in 1989. It shows how the tax system is moving to meet the requirements of a market economy. It suggests that a particularly high priority has to be given to avoiding taxes which require administrative discretion and to reducing administrative complexity.A tax-benefit model is used to look at two particular aspects of tax and social security design. It shows that the administratively convenient move to a single-rate VAT could have been achieved without adverse distributional effects, but with a slight increase in overall marginal tax rates. It also analyses the effects of the Czech plan for replacing universal benefits with means-tested benefits. This is shown to reduce budgetary costs and reduce poverty, but at the expense of increasing marginal tax rates.

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Bibliographic Reference

Heady, C and Smith, S. 1995. 'Tax and Benefit Reform in the Czech and Slovak Republics'. London, Centre for Economic Policy Research.