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Distributive Impact of Czech Social Security and Tax Systems in Early 2000`s



In this paper, we analyze the Czech social and tax systems and their impact on income distribution. We use regular household surveys, organized and published by the Czech Statistical Office (CSO), for years 1999-2002. This longer time span allows us to identify some trends in the Czech social security system and their impact on well-being of various income groups. We find that while the total cost of the Czech social security system were not escalating in the period of 1999-2002, the illness benefit – already the largest spending program – rose by enormous 72% in these four years. This largesse failed, however, to improve income of the poorest households as the benefit is very inefficient in increasing income of the poorest households. We also find that spending on more focused programs (social supplement and parental allowance) rose the least. Last but not least, we analyzed the impact of tax deductions on the income distribution in the Czech Republic. These deductions represent a massive transfer, comparable to all social benefits combined. Our analysis shows, that the impact of tax deductions on income of the poorest decile fell significantly over the period of 1999-2002.

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