Abstract
The paper focuses on tax expenditures of individuals, which are one of the fiscal tools of the state. In the Czech Republic they are primarily aimed at housing policy, pension policy, and philanthropy, and the question is the extent to which tax expenditures can influence the preferences of tax payers. The aim of this paper is to evaluate the effect of tax expenditures of individuals in the form of tax deductions for social policy, housing support and retirement savings. We also evaluate whether these tax deductions fulfill the fiscal functions for which they were introduced and the extent to which taxpayers use them. Methodically, the research is based on the analysis of secondary statistical data of the Financial Administration of the Czech Republic and results from aggregated tax returns filed for the period 2005–2015. The effect of tax deductions was decreased by abolition of the progressive rate of personal income taxes and by introduction of a uniform tax rate of 15%. Tax deductions for retirement savings do not have a sufficiently strong motivational impact and do not affect taxpayers in the context of public policy. Deductions for mortgage interest can be regarded as a form of major housing support, but are related to taxpayer income and favor those with higher incomes.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Alpanda, S. A., & Zubairy, S. (2016). Housing and tax policy. Journal of Money Credit and Banking. Hoboken: Wiley-Blackwell. 48(2–3), 485–512.
Blechová, B., & Sobotovičová, Š. (2016). Analysis of tax education in a business school: A case study. Periodica Polytechnica Social and Management Sciences., 24(2), 113–118.
Braga, M., & Palvarini, P. (2013). Social housing in the EU. Directorate general for internal policies, Policy department A: Economic and scientific policy. Retrieved from: http://www.europarl.europa.eu/RegData/etudes/note/join/2013/492469/IPOL-EMPL_NT%282013%29492469_EN.pdf. Accessed 15 December 2016.
Czech National bank (CNB). (2017). ARAD public database. Retrieved from http://www.cnb.cz/cnb/STAT.ARADY_PKG.VYSTUP?p_period=12&p_sort=2&p_des=50&p_sestuid=1538&p_uka=2&p_strid=AAD&p_od=200512&p_do=201710&p_lang=CS&p_format=0&p_decsep=%2C. Accessed 15 February 2017.
Czech Social Security Administrative (CSSA). (2017). Pension reform. Retrieved from: http://www.e-podani.eu/cz/duchodove-pojisteni/duchodova-reforma/M%C3%A1la+d%C5%AFchodov%C3%A1+reforma+v+ot%C3%A1zk%C3%A1ch+a+odpov%C4%9Bd%C3%ADch.htm. Accessed 2 January 2017.
Czech Statistical Office (CSO). (2017a). Works and wages. Retrieved from: https://www.czso.cz/documents/10180/32853391/300002164435.pdf/16d703e1-3681-408b-826c-a3157dc184ee?version=1.1. Accessed 15 February 2017.
Czech Statistical Office (CSO). (2017b). Main macroeconomic indicators. Retrieved from https://www.czso.cz/csu/czso/hmu_cr. Accessed 2 January 2017.
Dulebohn, J. H., Molloy, J. C., Pichler, S. M., & Murray, B. (2009). Employee benefits: Literature review and emerging issues. Human Resource Management Review., 19(2), 86–103.
European Union Law. EUR-Lex. (2011). Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States. Retrieved from: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:32011L0085. Accessed 12 December 2016.
Faricy, C., & Ellis, C. (2014). Public attitudes toward social spending in the United States: The differences between direct spending and tax expenditures. Political Behaviour, 36(1), 53–76.
Financial Administration of the Czech Republic (FACR). (2016). Analysis and statistics. Retrieved from: http://www.financnisprava.cz/cs/dane-a-pojistne/analyzy-a-statistiky/udaje-z-danovych-priznani. Accessed 14 June 2016.
Financial Administration of the Czech Republic (FACR). (2017). Act No.586/1992 Sb. on Income Tax as amended. Retrieved from: http://www.financnisprava.cz/en/tax-forms. Accessed 12 February 2017.
Friedman, M. (2009). Capitalism and freedom: Fortieth Anniversary Edition. Chicago: University of Chicago Press.
Garcia, M. T. M. (2017). Overview of the Portuguese three pillar pension system. International Advances in Economic Research, 23(2), 175–189.
Janoušková, J., & Kirschnerová, P. (2017a). Scope of the use of the individuals tax reliefs in the Czech Republic. Acta academica karviniensia, 2017(1), 55–64.
Janoušková, J., & Kirschnerová, P. (2017b). Tax incentives in the context of old age insurance in the Moravian-silesian region and in the Czech Republic. Acta Sting, 2017(4), 6–20.
Janoušková, J., & Sobotovičová, Š. (2013). Distortion in taxation of wages. Finance and the performance of firms in science, education, and practice. Zlín, Czech Republic: Tomas Bata University in Zlín, 290–301.
Kantarci, T., Smeets, I. A. J., & van Soest, A. (2013). Implications of full and partial retirement for replacement rates in a defined benefit system. The Geneva Papers on Risk and Insurance - Issues and Practice, 38(4), 824–856.
Kubátová, K., & Jareš, M. (2011). Identification and quantification of tax relief in the Czech Republic in the year 2008. Politická ekonomie, 59(4), 475–489.
Ministry of Finance of the Czech Republic (MFCR). (2014). Zpráva o daňových úlevách v České republice za roky 2011–2015. Retrieved from: http://www.mfcr.cz/cs/verejny-sektor/hospodareni/rozpoctove-ramce-statisticke-informace/danove-ulevy. Accessed 10 January 2017.
Ministry of Regional Development (MRD). (2017). Selected housing data. https://www.mmr.cz/getmedia/591a96af-b311-4f71-a619-eef9c3906b23/Vybrane-udaje-o-bydleni-2016_1.pdf?ext=.pdf. Accessed 15 February 2017.
OECD. (2016). Economic survey of the Czech Republic. Paris: OECD Publishing http://www.oecd.org/eco/surveys/Czech-Republic-2016-overview.pdf. Accessed 25 April 2018.
OECD. (2017). Taxing wages 2017. Paris: OECD Publishing. https://doi.org/10.1787/tax_wages-2017-en Accessed 15 February 2017.
Pechman, J. (2001). Federal tax policy. Washington: Brookings Institution Press.
Podoaba, L. (2015). An empirical research regarding the link between tax insurance, level of living standards and development of the insurance branch. In: Procedia Economics and Finance, 32, 1525–1540.
Poterba, J., & Sinai, T. (2011). Revenue costs and incentive effects of the mortgage interest deduction for owner-occupied housing. National Tax Journal, 64(2), 531–564.
Prasad, M. (2011). Tax “expenditures” and welfare states: A critique. Journal of Policy History, 23(2), 251–266.
Řezanková, H., Húsek, D., & Snášel, V. (2007). Shluková analýza dat. Příbram: PBtisk.
Sunega, P. (2005). The effectiveness of selected housing policy subsidies in the Czech Republic. Czech Sociological Review, 41(2), 271–299.
Surrey, S. (1973). Pathways to tax reform: The concept of tax expenditures. California: Harvard University Press.
Surrey, S., & McDaniel, P. (1985). Tax expenditures. Cambridge: Harvard University Press.
World Bank Policy Research Report. (1994). Averting the old age crisis, policies to protect the old and promote growth. New York: Oxford University Press.
Acknowledgements
This paper was supported by the Student Grant Competition of the Silesian University in Opava 2016, with the number SGS 20/16, named “Tax relief individuals as part of the promotion of public policies in the Czech Republic.“
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Kirschnerová, P., Janoušková, J. Are Tax Expenditures of Individuals Only a Tool of Tax Optimisation?. Int Adv Econ Res 24, 239–252 (2018). https://doi.org/10.1007/s11294-018-9696-6
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11294-018-9696-6