H22 - Taxation and Subsidies: IncidenceReturn

Using analytical tool "safely untaxed tax base" we estimate redistributive impact of proposed changes in personal income taxation based on the plans of the Czech Social Democratic Party. We also compare impacts of other potential variants of changes in the basic elements of tax technique (reintroduction of the concept of gross wages, changes in the structure of nominal rates, adjustments in the basic personal tax credit). According to the legislation in 2017, 25 % of employees do not pay income tax due to the generous tax credit (and 72 % of all self-employed persons). Returning to the tax system of 2007 (which was based on the concept of "gross wage", lower tax credit and progressive tax rates) would lead to a significant reduction in the number of people with zero tax (as a result there would be only a few percent). By using the knowledge of behavioral economics, it can be deduced that this may lead to more significant efforts for more intense tax planning. Far-reaching and hardly predictable social or retirement consequences can be deduced.

Since the Miller and Modigliani (1958, 1963) theory of capital structure the literature struggles to include cost of financial distress in the cash flow theories of capital structure. Besides that most of the recent models are static. Let us just remind the contributions by Cooper, and Nyborg (2006), Farber, Gillet, and Szafarz (2006), Qi, Liu and Johnson (2012) or Fernández's (2004, 2007) analysis of their predecessors' work. This paper brings dynamic, and risk consistent (in the meaning of return being purely growing function of risk), although regarding the quantification of financial distress cost somewhat simplified model. His advantage is simplicity and observability of all its exogenous (input) variables. However, the clarification of relationship between face and market value of debt, and empirical test of model are needed.

Research on public expenditure incidence is not as extensive as the tax incidence study even though it is important as well. The problem of the public expenditure incidence is identification of individuals on whose behalf public expenditures are made and calculation of their benefits. There are two ways how to approach to this problem. The behavioural approach is theoretically pure but it is very demanding for data. That is why the benefits are approximated with budget amounts in the cost of service approach. This paper distinguishes this approach from the behavioural one and describes its limitations. Then it provides details about the procedure of incidence analysis applied on the state budget expenditures in the Czech Republic. To determine which households benefited - and how much - from the state budget expenditures a microsimulation model was developed using the Household Budget Survey sample. Results show that lower-income households received larger benefits from the state budget expenditures in the given year than higher-income households on an annual basis.

The paper is based on general function of tax reforms. It evaluates VAT from the perspective of the taxpayer in the planned change of VAT rates in Czech Republic. The main aim is to analyze the impact of the changes on individual households deciles. The methodology is based on the database Czech Statistical Office. Then simulation analysis on family accounts is made. The data obtained are discussed in terms of tax equity. The result is that VAT has already regressive impact and the planned unification of the VAT rates increases regression.

Excise duty imposed on cigarettes is a subject of tax harmonization effort in the European Union. Important element of this effort is the unification of tax rates, harmonization of proportions of individual parts of tax rates and harmonization of total amount of tax imposed on cigarettes. Cigarette taxation requirements referring to mentioned criteria vary, therefore the European Union member states, including Czech Republic, member since 2004 - must adapt their national legislation according to these changes. Despite of several exceptions negotiated during the entry procedure and even after expiration of the transitional period term, one of these criteria stayed unfulfilled. However, today the Czech Republic is fulfilling all requirements concerning the cigarette taxation. According to actual proposal to a directive regarding the taxation of tobacco taxation other harmonization steps are assumed in 2010 and 2014 and the Czech Republic is urged to respond them.

Consumption taxes are traditional source of public revenue in the Czech Republic and have been the second largest source of leakage of households' finance in the last decade following the social security contributions. However there is a lack of the precise redistributional analyses of the consumption taxation on individual/household level because of no suitable microsimulation model for the Czech Republic. This paper focuses on the construction of the static microsimulation model capable estimates individual VAT burden using data from the Czech Household Survey. This model is possible to be used in area of redistributional analysis of the tax reforms or in identification of statistically significant variables influencing tax burden.