Taxes as a tool of family policy: what kind of family benefits from the Czech social security and tax system?

Olga Sivkova, Charles University in Prague

Nowadays financial support to the family with dependent child/children is an inseparable part of family policy in developed countries and in essence it is provided as a compensation for costs related to children rearing and/or as an acknowledgement regarding fulfilment of family functions. The support is granted directly via social security system or indirectly via tax system. Although both systems are frequently interconnected, the study is focused predominantly on support via taxes in the framework of the Czech Republic. It discusses the nature of taxes, how taxes can be utilized in family policy, map the features of the social security and tax system in the Czech Republic from the early 90’s of the 20th century to the present and analyses what kind of family benefits from both systems considering the changes. While the social security system has remained relatively unchanged except for amounts of provided benefits and requirements over transformation period, the tax system in respect of the family with dependent child/children underwent several turns in applied tax technique. The tax deductible items were replaced by tax reliefs, afterwards common taxation of married couple was introduced and finally, common taxation was swapped for a concept of “the super gross wage”. Besides that tax rates and amounts of tax deductible items and reliefs were modified several times since the early 90’s. Taking this into account the financial situation of incomplete family and cohabitation are compared to the complete family based on marriage, while characteristics as employment status of a partner, different income levels, number of dependent children and their age are considered.