Fiscal policy and taxes in the Czech Republic VOŠ – 2. Ročník – 1. semestr

Fiscal policy is a set of principles and decisions of a government about public expenditure and how that expenditure is financed it includes government spending, government borrowing or taxes all these items help to stimulate or slow down the economy ©Lenka Lexová

Instruments of fiscal policy Expenditure - governments spend money on things such as the military, police or services like education and healthcare Transfers of payments are welfare benefits (social benefits, sick pays, pensions) Taxation Borrowing money from the population causing a fiscal deficit ©Lenka Lexová

National budget is a plan of the intended revenues and expenditures of a government A budget deficit happens when a government spends more money than it takes in, the opposite is a budget surplus the budget can be balanced ©Lenka Lexová

Taxes are financial charge which an individual or a legal entity must pay to the state taxes are used to finance public order, economic infrastructure, public works, social engineering, welfare and public services - education systems, health care systems, pensions, unemployment benefits, public transportation ©Lenka Lexová

Types of taxes Do you know the difference between the items bellow, try to explain, if not look it up on the internet. Proportional taxes Progressive taxes Regressive taxes Direct taxes Indirect taxes ©Lenka Lexová

Government purchases They are a part of government spending or government expenditure Government agencies may produce services like communications, education, emergency, entertainment, financing, fire fighting, healthcare, insurance, law, police, postal service, transport Government may produce goods like coal, electrical infrastructure, oil, roads, bridges, tunnels, steel, water infrastructure ©Lenka Lexová

Transfers It is a payment of money from a government to an individual in need, they include: welfare unemployment insurance social security payments pensions and support for students, including scholarships and financial aid and death benefits for parents ©Lenka Lexová

Public debt is money (or credit) owed by a government when the government spendings are higher than earnings governments usually borrow by issuing securities such as government bonds and bills ©Lenka Lexová

Types of taxes Corporate income tax Personal income tax Immovable property tax Consumption tax Road tax Value added tax Inheritance, gift, immovable property transfer tax ©Lenka Lexová

Corporate income tax a tax imposed on the profits of companies or associations it includes deductible items – gifts for education, culture, environment, charity or church purposes What is the current percentage of this tax? ©Lenka Lexová

Personal income tax a tax imposed on the financial income of persons they tax the total income of the individual (with some deductions permitted) What is the current percentage of this tax? ©Lenka Lexová

Immovable property tax is a tax imposed on property it includes tax on buildings and land it differs and according to the value of the land estate buildings (location, size etc.) ©Lenka Lexová

Consumption tax is a tax on the purchase of a good or service it applies to fuels, spirits, liquors, wine, tobacco products ©Lenka Lexová

Road tax a tax paid for usage of automobiles it is imposed on companies and individuals the amount depends on number of lorries and personal cars ©Lenka Lexová

Value added tax is imposed on the value added to a product all businessmen and firms whose turnover exceeds one million in the last 12 months become VAT payers all consumers have to pay VAT when purchasing products ©Lenka Lexová

Inheritance, gift, immovable property transfer tax imposed on sb. who inherits assets the tax rate for inheritance taxes depends on the value of the property and his/her relationship to the person a gift tax is a transfer tax imposed on the value of certain gifts ©Lenka Lexová

Listening Taxes What are taxes in the Czech Republic used for? Do you think that the level of our taxes is high or low. Which insurance is voluntary, social or healthcare, what causes does it have? ©Lenka Lexová

Discussion What would happen if we stopped paying taxes? Do all people pay income tax? Is it legal? What would you change about taxes in the Czech Republic. ©Lenka Lexová

Imagine the following situation You own a small firm producing furniture. You are looking for a new worker. Will you choose a worker with trade certificate or employ a worker. Consider taxes. Discuss with your partner about advantages and disadvantages of both of them. ©Lenka Lexová

Resources English in Economics, Miroslav Kaftan, Libuše Horáková:, Karolinum 2004 http://www.listenaminute.com/ www.wikipedia.org ©Lenka Lexová