News

19 for everything or a Happy New Year 2011

The discussion of the legislation reforms regarding the income side of the budget has seemed to be rather unclear recently. Somewhere deep in the dark caverns of the Ministry of Finance, the new Income Tax Act is (allegedly) being frantically prepared, but the public knows nothing about it – perhaps except for it will be a real revolution, which will not increase the overall tax burden on taxpayers.

The debate appearing in the media is limited to changes in tax rates. A tax rate is not the most important quality of a tax system but it is clearly seen and you can tell how it might affect a taxpayer’s duties – if it goes up, you are likely to pay more.

It is interesting that the speculations approach 19% both for VAT and for income tax. Even the Prime Minister, Petr Nečas, has admitted considering the option of unifying the VAT rates on this level. Personal income tax should be calculated in a different way – by cancelling the "supergross” salary and increasing the tax rate. Little will change for the majority of people with no changes for some. And the rate of the new tax, calculated based on the "net" income, will be, say, also 19%.

As if the spirit of Vlastimil Tlustý and his flat tax from the 2006 election campaign was hovering here. VAT 19 and income tax 19 for both individuals and corporate entities.

One could expect tax advisors will be jobless. It seems the tax system will be simpler and we will have no room for optimising. For example, there will be no difference between prices of small and large flats; no longer will we think about whether to buy a kitchen unit separately, or from a developer, as a part of the construction work.

We would like to send you our best wishes and may you have a prosperous New Year. Don’t worry about us, a rate's not everything. If our legislators continue their efforts to make our tax system simpler and more transparent in the same way they have done until now, there will be work for us to do for generations ahead.

We hope that you will also have a successful year.

TACOMA Tax team

If you need more detailed information, please do not hesitate to contact us.

About TACOMA
TACOMA is a leading, full-service advisory firm located in the Czech Republic, providing integrated services for its clients in mergers & acquisitions, corporate finance, valuations, tax, trust services, audit, management consulting, accounting & payroll. Since 1993, the company has successfully completed restructuring processes for more than 160 major companies with its team of over 100 professionals. More detailed information is available at www.tacoma.eu.