Prague - The Finance Ministry prepares as of next year to limit flat expense write-offs for self-employed and will not introduce a single VAT rate at 17.5 percent, approved earlier, Finance Minister Andrej Babis and his deputy Simona Hornochova said at a press conference.
The ministry also considers introduction of a third VAT rate for medicines, books and baby food. It also intends to postpone the setup of a single collection point, which would merge collection of taxes and insurance contributions, and to introduce measures against tax evasions.
The ministry also prepares reintroduction of tax deduction for a second child and more children and tax relief for working pensioners.
After discussion with experts, it plans to abolish the supergross wage concept and replace the 7 percent tax for people on high income with a second tax rate.
"In order to prepare the adjustments to be introduced as of next year, we have roughly one month to incorporate them into laws. It can be said that there will be changes in the proposals with effect as of 2015. They are necessary because they stem from coalition agreements and are not complicated," Hornochova said.
The ministry wants to remove from the relevant law the setup of a single collection point. It will also abolish the approved flat exemption of dividends from taxes and remove from the relevant law the approved lower limit for tax deduction on mortgage loans and loans from building societies. The limit will thus remain at Kc300,000 instead of the approved Kc80,000.
In the law on single collection point setup, it shows that the long time between the approval of a law and its coming into force does not have to be positive. The law was approved at end-2011. Many points have been updated in other legal norms since then so the law´s provisions are now practically of no use at all, Hornochova said.
One of the reasons for the single collection point plan´s cancellation is last year´s reorganisation of tax administration and recodification of the Civic Code.
"If we came up with such an important change in tax payments in addition to this, the system would maybe not function. We do not resign on the concept, however," she said.
In the case of the second VAT rate, the ministry was thinking about a 5 percent tax. But the state budget would thus lose Kc7.8bn from medicines alone and another Kc0.5bn in case of books. It is therefore thinking about a 10 percent rate. As regards baby food, the ministry has asked the government coalition partners for a stance.
As for measures against tax evasions, the ministry would like to introduce online registration of sales of retailers and receipt lottery so that people will demand receipts for their shopping.
An analysis of the Croatian and Hungarian models that the ministry would like to use should be ready at the end of this year. The ministry also wants to raise taxes on games and lotteries and in general to tax Internet lotteries.
The institute of "unreliable VAT payer" is to be widened as of next year, a central register of bank accounts is to be created and as of 2016, an electronic register for VAT purposes is to come into existence.
The tax quota in the Czech Republic is relatively high and costs of labour are close to those in France, Babis said.
"If we manage to convince all potential taxpayers that their money is not being wasted or stolen, we will maybe in the future see a moment when we will all be proud of paying taxes," Babis stated.
The changes proposed by the Finance Ministry in the tax area are significantly hostile to businesses because they will bring a higher direct tax burden, said former finance minister Miroslav Kalousek.
Kalousek is also against the proposed third VAT rate which he considers as non-systemic.
"The main thing that needs to be said is that what the Finance Ministry made public today means a much higher tax burden than the effective legal norms suggest," Kalousek said in his reaction for CTK and the Czech Television today.
Kalousek estimated the higher burden in direct taxes at Kc20bn annually.
As for the third VAT rate, Kalousek is strictly against it. "A third VAT rate is of course a step back, it means more paperwork and higher costs, as well as bigger space for tax evasions," he said.