Abstract
This study assesses the consequences of increasing child tax credit for the second child in a family by 500 CZK per month, and for third and further children by 900 CZK per month, as proposed by the Czech government in late May 2014. This raise would be complete in 2017.
We estimate that such a raise would result in a loss to the state budget of 4.7 billion CZK per year. The proposed changes would reduce tax liability for approximately one fifth of non-retired households.
The average household with more than one child would save c. 7 300 CZK per year. This would not, however, significantly improve the situation for the poorest households, because those households tend not to have a high enough income to be eligible for child tax credit, or may be subject to a maximum limit on tax credits.
The proposed raise would result in an increase in the already high tax differential between men and women, and would increase the disparity in taxation levels between childless individuals and married couples with children.