Fiscal consolidation strategies in the Czech Republic
In the Czech Republic, the deadline for paying property tax is May 31, 2024. This year, however, this tax is proving to be very expensive as the basic rate has increased by an average of 80% per square meter. This increase is part of the public finance consolidation plan implemented last year.
Property tax applies to all owners of land, residential units, and other buildings. The taxpayer is also the user (i.e., tenant or leaseholder) of the land if the owner is unknown. Every year the tax office asks the taxpayer to pay, allowing payment by bank transfer, money order, or cash at the tax office or the cashier’s office of the Czech National Bank.
The final rate of increase varies from municipality to municipality, based on the so-called local coefficient. The law allows municipalities and city districts to multiply the “base” by a coefficient from 0.5 to 5.0, and based on this, the amount will change. The property tax may appear different in specific figures. The annual calculation is influenced by both the size and type of the property and the location in which it is located. Two coefficients then regulate the total rate. The first is graduated based on the size of the municipality in the city where the property is located; the second called the local coefficient, is determined instead by individual municipalities.
Alexandra Kocková, spokesperson for the Association of Towns and Municipalities of the Czech Republic, said that the cost of managing and operating towns and municipalities continues to increase every year, while the state increasing transfers responsibilities to local governments without providing adequate funding, especially for human resources. She also pointed out how taxes have remained unchanged in many areas for over 10 years. According to the spokeswoman, the recovery package has had such a negative impact on municipal budgets that she went so far as to call it a disaster. Therefore, cities and municipalities are considering adopting a property tax coefficient based on specific local knowledge and examining the possibility of involving different business entities in co-creating and supporting local development.
The head of selection on property taxes at the Chamber of Tax Advisors of the Czech Republic, Petr Koubovský, said the approval of the redevelopment package has introduced significant changes to the tax and pointed out that many people are unaware of the 80% increase, especially those who have not filed tax returns. This is because it is sent only when there are changes in the ownership or condition of the property.
As for tax payments, those who are required to pay will receive the information through different ways, such as data mailboxes, e-mails, or receipts by May 24. Because of the significant tax increase, those registered on the My Taxes portal will also receive physical reminders. The IRS will send a total of 1.8 billion reminders by mail. Payment details will include the authority’s account number and a QR code to facilitate payment via internet banking. Date of birth and ID card details will also be requested.
In conclusion, property tax in the Czech Republic has become more onerous this year, under a maneuver that is part of a broad plan aimed at consolidating public finances. Despite some efforts to mitigate the tax impact, most municipalities have not changed tax ratios, leaving many citizens and businesses with a constant tax burden.
Sources: https://www.seznamzpravy.cz/
