Distribution of average, marginal, and participation tax rates among Czech taxpayers: results from a TAXBEN model. [Podkladová studie ke Studii IDEA 8/2013: Kdo a kolik odvádí do společné kasy? Zdanění příjmů ze zaměstnání a podnikání v českém systému]
Abstract
We present empirical distributions of the average, marginal, and participation tax rates on earnings across the population of Czech taxpayers under the current tax-and-benefit system. We quantify significant differences between the taxation of employees and the self-employed: The average tax rates on wage income and business income are 37.4 and 28.1 percent, respectively, even though the self-employed tend to have higher earnings.
On average, employees and the self-employed face effective marginal tax rates of 47.8 and 34.2 percent, respectively. The tax system exhibits almost no overall progressivity - the top income decile earns 26.7 percent of total income and pays 26.7 percent of total taxes.
There are large dispersions in the tax rates for people with similar earnings. These are primarily created by generous tax credits and the inevitable differences among taxpayers in eligibility for these credits.