Press Advisories

7. 4. 2010 15:31

OECD: Economic Survey of the Czech Republic, 2010

Organisation for Economic Co-operation and Development (OECD) Secretary General Ángel Gurría officially presented the Economic Survey of the Czech Republic on 6 April 2010. It evaluates the country's economic situation and the steps the government has taken in this regard.

The OECD report recommends that the Czech government prepare a clear plan for the medium term for achieving a structurally balanced budget. Consolidation should occur on the basis of structural reforms and ensuring balanced revenues. It should use the potential for savings on expenditure programmes through making them more effective and limiting their further growth, and not just as part of preparations for entrance into the eurozone.

Another problem the report covers is the aging population. This will certainly bring large expenditures which will require steps toward the realisation of further reforms, whether they are reforms of the health care or pension systems. According to the OECD, they are necessary to ensure long-term fiscal sustainability. The government has already completed certain necessary steps, but more additional measures are of course needed, such as the diversification of long-term pension revenue sources. This comes despite the Czech Republic having implemented tax reforms in previous years, as well as reforms in the area of social subsidies; it is necessary to return to certain problems which have remained completely resolved.

The Czech Republic should also focus on shifting the tax burden toward distortion taxes. According to the Organisation for Economic Co-operation and Development, it should use indirect taxes more. This would include consumption and environmental taxes, as well as taxes on assets.

The Czech Republic should also place emphasis on improved coordination of tax and subsidy policies. Sufficent coordination is lacking in this area, which could lead to unwanted interactions between the tax and subsidy systems. In this regard, the OECD recommends carrying out more systematic analyses of their mutual action, on the basis of which similar problems could be avoided.

The Czech Republic must continue to work on removing additional deformations in the taxation of labour and capital. According to the Organisation for Economic Co-operation and Development, this leads to different handling of employees and the self-employed, which leads to the aforementioned deformation of behaviour among participants on the labour market. The implementation of a law on income taxes on legal entities favouring certain asset types and sources of financing investments instead of others leads to the inappropriate influencing of investment allocation.

The OECD recommends additional decreases in rigidity on the product and labour markets. The Czech Republic should attempt to decrease obstacles to entering the product market, strengthen economic competition, especially in the network sector, and also to free up regulation on the labour market.

The report also presents recommendations on continuing regulatory reform. In introducing measures which should lead to freeing up regulations on the product and labour markets, emphasis should be placed on greater consistency in the implementation of regulatory policy, especially in the simplification of administration or in the effective evaluation of regulation's impacts.

The Economic Survey of the Czech Republic also looks at the area of e-government. It recommends additional development which could, according to OECD assumptions, be of assistance in achieving the aforementioned goals.

The Organisation for Economic Co-operation and Development is an international organisation founded in 1961. It is headquartered in Paris, and its highest official is the secretary general, who is currently Ángel Gurría of Mexico. Its main goal is the liberalisation of international trade and finance. Every year it publishes economic analyses and evaluations of economic results for individual member countries. The Czech Republic has been a member of the OECD since 1995. The Organisation for Economic Co-operation and Development now has a total of 30 members.

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