Incidence of the VAT Rates Harmonisation in the Czech Republic

This paper reports results of the research concerning incidence of the value added tax in the Czech Republic over the period 1993-2004. The aim of our research was to analyse the impact of the harmonisation of the VAT rates connected with the entry of the Czech Republic into the EU on the distribution of the tax burden among households with different attributes including income. In our analysis we used 2004 Household Budget Survey data on consumption expenditures and various households´ attributes. Considerable issue of our research was to estimate the VAT burden for each household in the statistical survey before and after the entry into the EU. We found out that the VAT burden of Czech households increased after the VAT rates harmonisation. Important result of our analysis was that the Czech VAT is progressive. The progressivity of the VAT is probably caused by a design of the tax when different items of household consumption are taxed at different rates including exemptions. Moreover, we found out that the Czech VAT was more progressive when the VAT was introduced than in time of the accession to the EU.