Already this year, the Czech Republic has a record deficit of 310 billion crowns. The deficit may be even higher next year, Prime Minister Andrej Babiš (ANO) warned on Saturday. At the same time, a tax reduction for companies would mean an annual ax of over 20 billion.
On the contrary, according to experts, faster depreciation of acquired property represents significantly more effective support for the economy.
“Reducing the tax rate would increase the outflow of profits abroad, increase the wages of the top tenth of employees and lead to investments only to a limited extent. In addition, for 23 billion per year for the state budget,” economist Markéta Malá from the Center for Public Finance of Charles University told Novinka.
According to her, the government heard the arguments of experts and business representatives. “Reducing the corporate tax rate from 21 percent to 19 would be an expensive step without a clear return,” she pointed out.
The Union of Industry and Transport of the Czech Republic did not comment on the reassessment of the promise, but welcomes faster depreciation. “Companies would welcome more significant tax support for key activities. Whether it’s deductions for research and development, introduction of new automation and robotization, revision of investment incentives or just accelerated depreciation, which will reduce the return on investment or innovation,” said union analyst Milan Klempíř. He added that it can help companies to increase their competitiveness.
Depreciation means a postponement of the tax liability, not its permanent reduction. According to the secretary of the Chamber of Commerce, Ladislav Minčič, they can improve the short-term cash flow of innovative companies in industry, logistics or technology development. “They motivate companies to invest,” he confirmed.
According to entrepreneurs, faster depreciation is more important than a slight tax reduction. “We definitely prefer accelerated depreciation. As a travel company, we don’t have much access to operational loans, so we pay for most things with our own money. The sooner we get them into costs, the better,” Vít Procházka, co-owner of the medium-sized travel agency Europe Bike Tours, told Novinkám.
Companies are waiting for the conditions
It will be important to set specific conditions for depreciation. “Their acceleration is definitely a smarter measure. It will help us get money back into circulation. It will have an effect on taxes and it makes a difference if they write off a hundred thousand in four or two years,” summed up Procházka.
