Politická ekonomie 5/2007

DODATEČNÉ ZDANĚNÍ NEJISTÝCH OSOBNÍCH PŘÍJMŮ V DŮSLEDKU DAŇOVÉ PROGRESE

THE PENALTY ON RISKY PERSONAL INCOME DUE TO TAX RATE PROGRESSION

Jan Vlachý, Točitá 44, CZ - 140 00 Praha 4 and University of Economics, nám. W. Churchilla 4, CZ - 130 67 Praha 3 (vlachy@vse.cz)

This paper analyzes the tax penalty on volatile personal income under progressive tax rates. The phenomenon may have an effect on long-term entrepreneurial decisions as well as risky occupational choice. An options-based model is used to estimate the expected effective rate due from tax-payers at different income levels and volatilities under the current Czech legislation. A comparison is made to the system which has been in place until 2005, as well as to the Slovak flat-rate schedule. The model shows that volatile incomes incur a substantial penalty of up to 2 percentage points on the effective rate peaking just below the official income statistics mean. The effect is more pronounced than under the former parameters of the tax code. A severe impact on below-average earners due to the mandatory minimum tax-base regulation has been demonstrated. On the other hand, the Slovak flat tax with a single marginal rate bears virtually no sensitivity to income volatility, with the slight exception of very low incomes.

Klíčová slova / Keywords: income tax, income volatility, occupational choice, option model, personal income, risk-taking, tax rate progression

JEL klasifikace / JEL Classification: D81, H23, H24, H30, J24