Beginning in January next year, the proposed government measures aimed at improving public finances will start to affect households across the country. These measures encompass a range of changes, including the elimination of nursery fees, a reduction in the spouse tax credit, the introduction of sickness insurance, adjustments to tax brackets, an increase in social security contributions for self-employed individuals, higher property tax, and changes in excise taxes and VAT.

The financial impact of these measures will vary depending on the specific circumstances of each household. Let’s delve into some of the significant changes that will have a “negative” effect on households:

Employees will once again contribute 0.6 percent of their gross salary towards sickness insurance, resulting in an annual loss for a married couple with a combined monthly income of 80,000 crowns. The reintroduction of sickness insurance will amount to an annual loss of 5,760 crowns.

Families with children will face additional financial burdens. The spouse tax credit for a spouse taking care of a child older than three years will be abolished, resulting in a loss of 24,840 crowns. Moreover, families with children attending nursery school will no longer benefit from the nursery fee tax credit, which currently corresponds to the minimum wage for the given year.

Housing costs will increase as the property tax doubles from its current level and continues to rise annually in line with inflation. Additionally, the VAT on water, sewage, and district heating will increase from 10 percent to 12 percent. The tax rate for waste disposal will also rise from 15 percent to 21 percent.

Individuals with home savings accounts will experience a reduction in government subsidies. The maximum contribution, currently set at 2,000 crowns per year, will be halved to 1,000 crowns.

The proposed changes in VAT rates will impact various expenses. Beverages, including infant and mineral water, will be subject to the standard 21 percent VAT rate. Medicines will be taxed at 12 percent, leading to increased costs. The prices of alcohol, hairdressing services, and newspapers will also rise due to the higher VAT rate. Smokers can expect higher costs as well, with a 10 percent increase in taxes on cigarettes, tobacco, and cigars in 2024, followed by an additional 5 percent increase over the next three years.

Other expenses will also see an increase. The annual highway vignette will become 800 crowns more expensive, reaching 2,300 crowns. Furthermore, the diesel consumption tax will increase by 1.50 crowns per liter.

As these measures come into effect, households will need to reassess their budgets and adapt to the changes in order to maintain financial stability in the face of increased costs.

Article by Prague Forum