On Sunday morning, the Ministry of Finance published the long-awaited draft of the state budget for next year. It has total expenses of CZK 2,316.1 billion and revenues of CZK 2,086.1 billion. The resulting deficit is to be 230 billion – 22 billion less than originally expected. “This is clearly a pro-growth budget that brings record investments,” the head of the state treasury, Zbyněk Stanjura, said (60, ODS).
Are we not raising taxes?
The state should improve its income by 146 billion next year. But not so much on investments, but on higher taxes. For companies, for example, by increasing the statutory rate by 2 percent, for natural persons, savings will be made by canceling or limiting tax rebates… “The Ministry expects an income of 414 billion crowns from value added tax, which represents an increase of seven percent. Corporate tax collection is expected to be 244.3 billion crowns, 13.5 percent more than this year. The personal income tax should bring 184.7 billion crowns to the budget, 18.8 percent more year-on-year,” economist Lenka Zlámalová pointed out on the X network, saying that despite the higher collection, according to the proposal, the Czech economy should only grow by 2.7 percent. The government of Petr Fiala (60, ODS) swears by the mantra that taxes are reduced…
Everyone has something
“What would the government do if it didn’t raise taxes and its income grew only by inflation? This is a brutally wasteful pre-election budget with harsh tax increases.” added Zlámalová.
Even ex-minister of finance Miroslav Kalousek did not spare criticism (63). “Government spending is growing by 126 billion. On this occasion, I salute all the politicians from the ODS who beat their chests this spring that “our government has broken the trend of growth in government spending”. Either I don’t understand the word “trend” or they weren’t telling the truth.” he wrote
More officials
The number of civil servants – which the cabinet originally planned to cut – will also increase. And by 1200 to more than 488 thousand. Expenditure on their salaries will thus increase by 11 billion to 277 billion crowns. And what does the MF say about the criticism? “The expected total tax revenues cannot be mirror-linked to the GDP growth indicator in constant prices, each tax has its own macroeconomic aggregate from which it depends (development of wages, household consumption expenditure, GDP in current prices, etc.)” Petr Habáň from the press department wrote to Bleska.
As economists see it
Štěpán Křeček, chief economist of BHS and advisor to the prime minister
More spending, more collection
Economist and adviser to Prime Minister Fiala Štěpán Křeček was a guest of the program Epicentrum on Blesk.cz (May 10, 2023) | Photo Blesk – Martin Pekárek
“The draft of the state budget for 2025 assumes that tensions will continue to persist on the labor market, which will lead to rapid growth in real wages. Thanks to this, more money is collected in personal income tax. In connection with the growth of real wages, it is also expected that household consumption will increase, which will have a positive effect on the collection of value added tax. Higher household consumption will also increase the profits of companies, which will pay more in corporate income tax.”
Lukáš KovandaTrinity Bank’s Chief Economist
No crisis insurance
Economist Lukáš Kovanda at the Epicenter on 4 January 2022 | Lightning: Jakub Poláček
“Instead of saving money, the government increases taxes and levies on people. Nevertheless, it is not possible to achieve a balanced budget, and on the contrary, it is hypothetically threatened with a deficit of over 300 billion again. This means that public finances are not prepared for a possible crisis, which is not forecast now, but that never happens. Crises are unpredictable, especially if they have the nature of a so-called black swan, which may again arrive next year, due to, for example, the tense geopolitical situation and the ongoing war in Ukraine. Czech politicians should therefore also save more on themselves and get public finances in shape in a way other than mainly just digging into the taxpayer’s pocket.”
Jakub Seidler, Chief Economist of the Czech Banking Association
To pay
Chief Economist of the Czech Banking Association Jakub Seidler. | Blesk archive
“The year-on-year increase in taxes is driven not only by the real growth (2.7% increase – editor’s note) of the economy, but also by nominal growth, as the increase in prices itself plays an important role in the collection of taxes. According to the latest forecast of the Ministry of Finance, nominal GDP growth should increase by 5.4% next year. For example, a large part of tax revenue is made up of employee income tax and contributions to social and health insurance. According to the forecast, the volume of wages and salaries should grow by 6.4% in the next year, which will increase tax revenues for the aforementioned items that are linked to wages and salaries. According to the ministry, household consumption should also grow by almost 4% next year in real terms and by 6.6% in nominal terms (due to price increases), which in turn will be important for VAT collection.”