Acta Univ. Agric. Silvic. Mendelianae Brun. 2014, 62(2), 307-314 | DOI: 10.11118/actaun201462020307

Measurement of Effectiveness of Personal Income Tax in the Tax System of the Czech Republic

Břetislav Andrlík
Department of Accounting and Taxes, Faculty of Business and Economics, Mendel University in Brno, Zemědělská 1, 613 00 Brno, Czech Republic

This article deals with the issues of effectiveness of personal income tax in the Czech Republic. The personal income tax in the Czech Republic, referred to as the tax on income of natural persons, represents a significant part of the public budget revenue (23.35% of all tax revenues in 2012). One of the principles of a good tax system is the principle of its effectiveness. The effectiveness of a particular tax is measured by various methods. The theory distinguishes between two types of costs expended on the collection of taxes, i. e. administrative costs (direct or indirect) and excessive tax burden. In the case of direct administrative costs the measurement compares the total volume of a particular tax revenue with the costs of its collection. The amount of the tax levied is thus not a net income of the public budget, due to the fact that it must be reduced by the costs of the public sector which are necessary for obtaining such amount.
In this contribution we shall focus on the measurement of direct administrative costs. The measurement of effectiveness of income tax on natural persons is performed with the use of the full-time equivalent (FTE) method, which is based on the classification of revenue authorities' staff according to their jobs and on the determination of conversion coefficients in order to identify costs related to the collection of a particular tax.
A separate part of the article deals with measurements of tax system effectiveness in the international scope. We cite an important international study, "Paying Taxes 2013: The Global Picture", annually prepared by the World Bank and PricewaterhouseCoopers, which analyses demands of tax systems in different countries of the world.

Keywords: tax on income of natural persons, income taxes, tax effectiveness, public budget

Prepublished online: May 23, 2014; Published: February 1, 2014  Show citation

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Andrlík, B. (2014). Measurement of Effectiveness of Personal Income Tax in the Tax System of the Czech Republic. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 62(2), 307-314. doi: 10.11118/actaun201462020307
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