The Czech government’s proposal to increase the corporate income tax rate from 19% to 21% as part of its consolidation package is not expected to have a significant impact on businesses’ decisions to relocate their headquarters to other countries with higher tax rates. Analysts interviewed by the Czech News Agency suggest that the 2% increase is relatively small and unlikely to motivate companies to seek relocation.

Jana Skálová from the TPA Group highlighted that the modest increase in the tax rate for legal entities is unlikely to prompt companies to consider relocation, especially considering that tax rates in other countries are often substantially higher. Similarly, analyst Jiří Tyleček from XTB stated that the proposed increase is within expected limits and, while it may affect the competitiveness of the Czech economy and reduce funds available for investment, it is not a significant enough factor to drive businesses to other countries.

Moreover, the corporate tax rate in the Czech Republic will remain close to the average among European Union countries. Tyleček noted that, based on the available information, companies are not expected to be disproportionately affected compared to other taxpayers. He also highlighted that the current state of public finances necessitates additional revenue generation beyond expense reduction.

Tax expert David Borkovec from PwC echoed these sentiments, stating that the adjustment in the tax rate is unlikely to disadvantage the Czech Republic in the eyes of foreign investors, especially when compared to neighboring countries. Borkovec also highlighted that the change in personal income tax, where a higher rate applies from a lower income threshold, is a more noteworthy adjustment. Nevertheless, he characterized this change as relatively minor in the broader context of the tax system.

While the tax rate increase is viewed as slight and unlikely to prompt relocations, some analysts caution that a stronger growth rate in the future could potentially lead to the outflow of engineering companies with foreign ownership to countries such as Poland, Romania, or Bulgaria.

Overall, analysts believe that the moderate increase in the corporate tax rate is unlikely to have a significant impact on businesses’ decisions to relocate, and the Czech Republic’s tax competitiveness remains favorable when compared to neighboring countries.