Economic Sustainability
#11Key Findings
Czechia falls into the upper-middle ranks (rank 11) in the area of economic sustainability.
A national circular economy strategy is in place, but the recycling infrastructure is weak. Infrastructure development has remained strongly reliant on EU funding.
The share of renewable energy production lags behind the European average. The government approved a draft climate and energy plan in October 2023, but there are substantial doubts as to whether the targets are feasible. Unemployment rates are very low, with regional and gender disparities. Labor shortages are a problem in some regions and sectors.
Tax rates are low overall, limiting the amount of revenue available for infrastructure investment. High environmental taxes revenues primarily reflect the continued use of harmful fuels. The country’s debt-to-GDP ratio has been rising, but remains low by EU standards at about 45%.
A national circular economy strategy is in place, but the recycling infrastructure is weak. Infrastructure development has remained strongly reliant on EU funding.
The share of renewable energy production lags behind the European average. The government approved a draft climate and energy plan in October 2023, but there are substantial doubts as to whether the targets are feasible. Unemployment rates are very low, with regional and gender disparities. Labor shortages are a problem in some regions and sectors.
Tax rates are low overall, limiting the amount of revenue available for infrastructure investment. High environmental taxes revenues primarily reflect the continued use of harmful fuels. The country’s debt-to-GDP ratio has been rising, but remains low by EU standards at about 45%.
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How committed is the government to driving the transition toward a circular economy?
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The government is clearly committed to transitioning to a circular economy.
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The government is largely committed to transitioning to a circular economy.
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3
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3
The government is somewhat committed to transitioning to a circular economy.
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1
The government is not at all committed to transitioning to a circular economy.
Czechia has the second-highest share of industrial output in its gross value added (GVA) among EU member states. The steel, metal, automotive, petrochemical, and construction sectors contribute significantly. The material footprint per capita – a measure of raw material use in final consumption – score (6.47) is higher than the OECD average (5.55), reflecting the weight of basic industries in the economy.
Following the EU action plan on the circular economy adopted in March 2020, the country has developed a national circular economy strategy, roadmap, and action plan. In December 2021, the government adopted the document “Strategic Framework of the Circular Economy of the Czech Republic 2040,” abbreviated as Circular Czech Republic 2040. To implement this long-term strategy, the Circular Czech Republic 2022 – 2027 Action Plan was adopted, which sets ten strategic objectives: Products and Design; Industry, Raw Materials, Construction, Energy; Bio-economy and Food; Consumption and Consumer; Waste Management; Water; Research, Development and Innovation; Education and Knowledge; Economic Resources; and Circular Cities and Infrastructure.
On some of these topics, there were indications of specific government policies that could be adopted, while others remained vague. For example, firms using secondary materials where possible were to be favored for government contracts, waste composting was to be supported, means to give a second life to products were to be encouraged, and financial resources from the EU were to be used to support infrastructure in circular cities.
The Ministry of the Environment is the strategy coordinator. The implementation of the objectives involves the Ministry of the Environment, the Ministry of Industry and Trade, the Ministry of Finance, the Ministry of Education, Youth and Sports, the Ministry of Agriculture, and the Ministry of Local Development.
Waste management is central to the circular economy. The recycling score in Czechia is higher than the OECD average (6.1). However, more support is needed to develop recycling technologies and invest in new methods for recycling waste and individual components of municipal waste. An example is plastic waste collection, which is high in Czechia. Still, the main obstacles remain the high landfilling rate, the weak recycling infrastructure, and the long-discussed but yet-to-be-implemented deposit return system for PET bottles.
Citations:
https://www.mzp.cz/C1257458002F0DC7/cz/cirkularni_cesko_predstaveni/$FILE/OODP-Predstaveni_Cirkularni_Cesko-20220507.pdf
Following the EU action plan on the circular economy adopted in March 2020, the country has developed a national circular economy strategy, roadmap, and action plan. In December 2021, the government adopted the document “Strategic Framework of the Circular Economy of the Czech Republic 2040,” abbreviated as Circular Czech Republic 2040. To implement this long-term strategy, the Circular Czech Republic 2022 – 2027 Action Plan was adopted, which sets ten strategic objectives: Products and Design; Industry, Raw Materials, Construction, Energy; Bio-economy and Food; Consumption and Consumer; Waste Management; Water; Research, Development and Innovation; Education and Knowledge; Economic Resources; and Circular Cities and Infrastructure.
On some of these topics, there were indications of specific government policies that could be adopted, while others remained vague. For example, firms using secondary materials where possible were to be favored for government contracts, waste composting was to be supported, means to give a second life to products were to be encouraged, and financial resources from the EU were to be used to support infrastructure in circular cities.
The Ministry of the Environment is the strategy coordinator. The implementation of the objectives involves the Ministry of the Environment, the Ministry of Industry and Trade, the Ministry of Finance, the Ministry of Education, Youth and Sports, the Ministry of Agriculture, and the Ministry of Local Development.
Waste management is central to the circular economy. The recycling score in Czechia is higher than the OECD average (6.1). However, more support is needed to develop recycling technologies and invest in new methods for recycling waste and individual components of municipal waste. An example is plastic waste collection, which is high in Czechia. Still, the main obstacles remain the high landfilling rate, the weak recycling infrastructure, and the long-discussed but yet-to-be-implemented deposit return system for PET bottles.
Citations:
https://www.mzp.cz/C1257458002F0DC7/cz/cirkularni_cesko_predstaveni/$FILE/OODP-Predstaveni_Cirkularni_Cesko-20220507.pdf
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How committed is the government to updating and protecting critical infrastructure?
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The government is clearly committed to updating basic technical infrastructure.
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The government is largely committed to updating basic technical infrastructure.
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The government is somewhat committed to updating basic technical infrastructure.
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The government is not at all committed to updating basic technical infrastructure.
The Czech Republic ranks 28th in the OECD in terms of critical infrastructure, but there is gradual, albeit slow, improvement. Its infrastructure development remains hesitant, with investment heavily dependent on EU support.
The Czech Republic has a dense rail network, with more than 121 km of railways per thousand square kilometers. The major strategic issue for rail transport is decarbonization. The price of EU carbon offset permits has created a strong financial incentive to cut carbon emissions, leading to a plan to electrify half of the remaining 3,000 km by 2030. The rate of development in recent years has been 2.8 km per year, meaning a significant acceleration will be needed to meet the target. There are also plans for high-speed trains, reaching 320 km per hour, for the Prague – Dresden route, with the start planned for 2027.
Water transport has a long tradition in the country but is limited mainly by the total length of navigable river sections. The Vltava and Elbe rivers are used for transporting goods, particularly for long-distance transport of bulk building materials, coal, oil, and its products, as well as containerized goods. However, droughts and low water levels have adversely affected usage in recent years, with the Elbe often too shallow for navigation on many days of the year. There have been proposals to construct more weirs to mitigate this problem, but such projects would be both expensive and effective only if the river is similarly made fully navigable on the German side. The current government is firmly opposed to this.
Additionally, there has long been an idea to link the Danube to the Elbe and the Oder through canals, which would require coordination with Poland, Slovakia, and Austria. The Ministry of Transport investigated this from 2016 – 2018 and judged it to be economically viable. Although a start was approved in October 2020, the project was abandoned by the new government in February 2023. It is worth noting that this idea has been proposed for over a hundred years, with plans developed but never implemented.
The availability of high-speed internet is gradually improving, even in less populated areas. Nevertheless, the share of households with fixed very high capacity network connections places the Czech Republic in the last third of countries. Coverage is even slightly worse in less populated areas (up to 100 inhabitants per km2). However, as high-speed internet connectivity improves, the risk of cybercrime also increases.
Cybersecurity is managed by the National Cyber and Information Security Agency (Národní úřad pro kybernetickou a informační bezpečnost, NÚKIB), established in 2017 as the central administrative body for cyber security. This includes the protection of classified information in information and communication systems and cryptographic protection. NÚKIB publishes an annual report on the state of cyber security in the Czech Republic.
Citations:
https://nukib.gov.cz/
The Czech Republic has a dense rail network, with more than 121 km of railways per thousand square kilometers. The major strategic issue for rail transport is decarbonization. The price of EU carbon offset permits has created a strong financial incentive to cut carbon emissions, leading to a plan to electrify half of the remaining 3,000 km by 2030. The rate of development in recent years has been 2.8 km per year, meaning a significant acceleration will be needed to meet the target. There are also plans for high-speed trains, reaching 320 km per hour, for the Prague – Dresden route, with the start planned for 2027.
Water transport has a long tradition in the country but is limited mainly by the total length of navigable river sections. The Vltava and Elbe rivers are used for transporting goods, particularly for long-distance transport of bulk building materials, coal, oil, and its products, as well as containerized goods. However, droughts and low water levels have adversely affected usage in recent years, with the Elbe often too shallow for navigation on many days of the year. There have been proposals to construct more weirs to mitigate this problem, but such projects would be both expensive and effective only if the river is similarly made fully navigable on the German side. The current government is firmly opposed to this.
Additionally, there has long been an idea to link the Danube to the Elbe and the Oder through canals, which would require coordination with Poland, Slovakia, and Austria. The Ministry of Transport investigated this from 2016 – 2018 and judged it to be economically viable. Although a start was approved in October 2020, the project was abandoned by the new government in February 2023. It is worth noting that this idea has been proposed for over a hundred years, with plans developed but never implemented.
The availability of high-speed internet is gradually improving, even in less populated areas. Nevertheless, the share of households with fixed very high capacity network connections places the Czech Republic in the last third of countries. Coverage is even slightly worse in less populated areas (up to 100 inhabitants per km2). However, as high-speed internet connectivity improves, the risk of cybercrime also increases.
Cybersecurity is managed by the National Cyber and Information Security Agency (Národní úřad pro kybernetickou a informační bezpečnost, NÚKIB), established in 2017 as the central administrative body for cyber security. This includes the protection of classified information in information and communication systems and cryptographic protection. NÚKIB publishes an annual report on the state of cyber security in the Czech Republic.
Citations:
https://nukib.gov.cz/
Graph View
How committed is the government to fully decarbonizing the energy system by 2050?
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The government is clearly committed to transitioning to a decarbonized energy system.
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The government is largely committed to transitioning to a decarbonized energy system.
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The government is somewhat committed to transitioning to a decarbonized energy system.
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The government is not at all committed to transitioning to a decarbonized energy system.
Czechia has been relatively slow in pursuing the decarbonization of its energy system, with progress heavily dependent on EU requirements. Electricity production from renewable sources in Czechia has long lagged behind the European average, as has the share of renewable energy in consumption. The renewable energy share in total final energy consumption was 15.88% in 2019 and 17.7% in 2021, both figures below the OECD average. Electricity production from fossil fuels ranks first, with nuclear energy in second place. The energy crisis of 2022 shifted the ratio of energy production sources in favor of coal-fired power generation. As a result, emissions remain high, with CO2 emissions from fuel combustion reaching 8.6 metric tons per capita in 2022, placing Czechia among the above-average polluters within the OECD.
In October 2023, the government approved a draft climate and energy plan outlining how the Czech economy should undergo the decarbonization process and meet its European climate and energy commitments by 2030. The plan emphasizes the development of renewable energy sources and energy savings. Currently, three critical documents in the field of climate and energy are under review: the Climate Protection Policy, the National Energy and Climate Plan, and the State Energy Concept. These documents will determine the Czech path to a zero-emission economy and society in the coming years. However, there are doubts among environmental groups and within the government about whether the targets will be met with current policies.
In 2021, several environmental groups won a ruling from the Prague court obliging the government to set legally binding targets. However, the Supreme Court annulled this ruling in February 2023, citing the absence of a relevant law requiring such targets. In November 2023, representatives of the parliamentary Pirate Party published a draft climate law that included legally binding medium- and long-term targets to achieve carbon neutrality by 2050. The draft also specified the establishment of a new Climate Council to oversee a detailed implementation program. Although the Pirates are part of the government, they did not receive, and had previously failed to secure, government support.
In October 2023, the government approved a draft climate and energy plan outlining how the Czech economy should undergo the decarbonization process and meet its European climate and energy commitments by 2030. The plan emphasizes the development of renewable energy sources and energy savings. Currently, three critical documents in the field of climate and energy are under review: the Climate Protection Policy, the National Energy and Climate Plan, and the State Energy Concept. These documents will determine the Czech path to a zero-emission economy and society in the coming years. However, there are doubts among environmental groups and within the government about whether the targets will be met with current policies.
In 2021, several environmental groups won a ruling from the Prague court obliging the government to set legally binding targets. However, the Supreme Court annulled this ruling in February 2023, citing the absence of a relevant law requiring such targets. In November 2023, representatives of the parliamentary Pirate Party published a draft climate law that included legally binding medium- and long-term targets to achieve carbon neutrality by 2050. The draft also specified the establishment of a new Climate Council to oversee a detailed implementation program. Although the Pirates are part of the government, they did not receive, and had previously failed to secure, government support.
Graph View
To what extent do existing labor market institutions support or hinder the transition to an adaptive labor market?
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Labor market institutions are fully aligned with the goal of an adaptable labor market.
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Labor market institutions are largely aligned with the goal of an adaptable labor market.
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Labor market institutions are only somewhat aligned with the goal of an adaptable labor market.
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1
Labor market institutions are not at all aligned with the goal of an adaptable labor market.
The unemployment rate in Czechia has been the lowest in the European Union in recent years, but regional and gender disparities persist. As of September 2023, women comprised 55.8% of total job seekers. Youth unemployment among 15-24-year-olds has decreased compared to the pandemic years, yet remains higher than the national average, albeit low by international standards (6.8% in 2022). Long-term unemployment is a persistent issue, predominantly affecting older and unqualified former workers in regions that were once dependent on older industries.
A major labor market challenge is the continuous labor shortage, estimated at approximately 300,000 against an employed labor force of 5.3 million. This shortage coincides with regional unemployment disparities and a skills mismatch for impending economic changes. Employers’ organizations advocate for immigration to address the labor shortage, a step conflicting with anti-immigration rhetoric from certain political factions. Despite this, flexibility has largely been achieved through the recruitment of foreign workers, who constituted 23% of the registered labor force in 2022, bolstered by the arrival of refugees from Ukraine. While some foreign workers came independently seeking employment, many are recruited by employment agencies that supply labor across the economy, including routine manual work in the manufacturing industry. Although a legal framework regulates these agencies’ activities, they often offer lower pay and worse conditions compared to regular Czech employees working alongside them.
Maximizing the use of existing resources – which would not fully address the current gaps – requires better transport, housing in areas of labor shortages, and, above all, adequate childcare facilities. These needs clash with policies that restrict public spending and a 1990s decision to support parents staying at home with young children rather than working.
Czech economic development has heavily depended on relatively routine work within branches of multinational companies, particularly in the motor-vehicle industry. These companies are attracted by lower wages than those in Western Europe and primarily produce for export. Higher pay for more skilled work in Western Europe makes it difficult to develop more demanding activities in Czechia. Technological advancements and the shift to electric vehicles indicate either a reduction in employment in Czechia or the emergence of new products with changed skill requirements. This long-term threat has not been a primary concern for employees, who are most aware of the continuing labor shortage; for multinational companies, which have tended to keep the most modern products at their home bases; or for the government.
A major labor market challenge is the continuous labor shortage, estimated at approximately 300,000 against an employed labor force of 5.3 million. This shortage coincides with regional unemployment disparities and a skills mismatch for impending economic changes. Employers’ organizations advocate for immigration to address the labor shortage, a step conflicting with anti-immigration rhetoric from certain political factions. Despite this, flexibility has largely been achieved through the recruitment of foreign workers, who constituted 23% of the registered labor force in 2022, bolstered by the arrival of refugees from Ukraine. While some foreign workers came independently seeking employment, many are recruited by employment agencies that supply labor across the economy, including routine manual work in the manufacturing industry. Although a legal framework regulates these agencies’ activities, they often offer lower pay and worse conditions compared to regular Czech employees working alongside them.
Maximizing the use of existing resources – which would not fully address the current gaps – requires better transport, housing in areas of labor shortages, and, above all, adequate childcare facilities. These needs clash with policies that restrict public spending and a 1990s decision to support parents staying at home with young children rather than working.
Czech economic development has heavily depended on relatively routine work within branches of multinational companies, particularly in the motor-vehicle industry. These companies are attracted by lower wages than those in Western Europe and primarily produce for export. Higher pay for more skilled work in Western Europe makes it difficult to develop more demanding activities in Czechia. Technological advancements and the shift to electric vehicles indicate either a reduction in employment in Czechia or the emergence of new products with changed skill requirements. This long-term threat has not been a primary concern for employees, who are most aware of the continuing labor shortage; for multinational companies, which have tended to keep the most modern products at their home bases; or for the government.
To what extent do existing labor market institutions support or hinder the transition to an inclusive labor market?
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Labor market institutions are fully aligned with the goal of an inclusive labor market.
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Labor market institutions are largely aligned with the goal of an inclusive labor market.
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Labor market institutions are only somewhat aligned with the goal of an inclusive labor market.
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Labor market institutions are not at all aligned with the goal of an inclusive labor market.
Cechia’s low unemployment rate (2.7% in the third quarter of 2023, according to the ILO, compared with 2.2% in the previous year) suggests a broadly inclusive labor market. While there are regional differences, they are not significant and have declined over time. The highest rates are in areas with a strong reliance on declining traditional industries, especially coal mining – notably Karlovy Vary (3.5%), Ústí nad Labem (4.8%), and the Moravian-Silesian Region (4.0%) – while the lowest were in Plzeň (1.5%) and Vysočina (1.3%). The rate for Prague was 2.4%. Additionally, there is a group that reported a desire to work but did not qualify for the ILO definition of unemployed. If included, this group would add only 1.6 percentage points to the overall unemployment rate.
Areas with high unemployment also had higher numbers of long-term unemployed. Those unemployed for one year or more accounted for 28% of all unemployed. Few of these, among either men or women, were under 30 years of age, suggesting that the causes lie in outdated skills or age-related health problems. The disincentive effect of benefits paid does not appear to be significant. Unemployment benefits provide reasonable protection, but in all cases, they expire before one year, leaving the long-term unemployed dependent on other benefits that provide only a subsistence minimum. They may face foreclosure conditions for unpaid debts, which lead to confiscation of earnings and logically reduce the incentive to find work.
Efforts have been made to provide specific help to the long-term unemployed. A project running from 2019 to 2023, co-financed by the EU, aimed to increase employment levels and limit illegal work. It provides counseling and access to training and short-term employment possibilities. A report on its success has yet to be produced.
Seniors are incentivized to remain employed through tax benefits. Old-age pensions are not taxed up to the volume of 36 times the minimum income, meaning their incomes can be quite high before being taxed. The tax-free allowance for pensioners is the same as for all other workers. Additionally, new legislation in 2023 raised the minimum for early retirement to 40 years of insurance contributions, up from 35 years. Retirement age will also be set annually for people turning 50, based on the development of national life expectancy.
Following an EU directive of August 2019 on work-life balance and transparent working conditions, a new Czech law will take effect on October 1, 2023, with certain provisions delayed until January 1, 2024. Key modifications include expanded employer information duties, electronic contracting options for labor transactions, rules for remote work, enhanced rights for parent employees, and relaxed formalities for the service of process. Notably, employees can request remote work, and refusal requires a specified reason. Remote work arrangements will require written agreements, with reimbursement rules for expenses incurred. Employers are advised to review and update their labor documentation to comply with the amended requirements.
Employers are required to provide appropriate working conditions for young people, ensuring tasks align with their physical and mental capabilities. Regulations prohibit juvenile workers from engaging in overtime, night work (except for brief educational purposes), or underground work in mining or tunneling. Individuals aged 15 and above who have completed compulsory schooling may be employed. Working hours for young people aged 15-18 are capped at 40 hours per week, with shifts not exceeding 8 hours. Regional branches of the Czech Labor Office oversee decisions regarding the employment of children, ensuring compliance with these regulations.
Citations:
https://eures.europa.eu/living-and-working/labour-market-information/labour-market-information-czechia_en
https://commission.europa.eu/system/files/2023-04/Czechia-CP-2023_EN.pdf
Act No. 281/2023 Coll., on the amendment of the Labor Code (Act No. 262/2006 Coll., as amended) and certain other laws
https://www.czso.cz/csu/czso/cri/zamestnanost-a-nezamestnanost-podle-vysledku-vsps-3-ctvrtleti-2023
https://www.uradprace.cz/web/cz/podpora-zamestnanosti-dlouhodobe-evidovanych-uchazecu-o-zamestnani
Areas with high unemployment also had higher numbers of long-term unemployed. Those unemployed for one year or more accounted for 28% of all unemployed. Few of these, among either men or women, were under 30 years of age, suggesting that the causes lie in outdated skills or age-related health problems. The disincentive effect of benefits paid does not appear to be significant. Unemployment benefits provide reasonable protection, but in all cases, they expire before one year, leaving the long-term unemployed dependent on other benefits that provide only a subsistence minimum. They may face foreclosure conditions for unpaid debts, which lead to confiscation of earnings and logically reduce the incentive to find work.
Efforts have been made to provide specific help to the long-term unemployed. A project running from 2019 to 2023, co-financed by the EU, aimed to increase employment levels and limit illegal work. It provides counseling and access to training and short-term employment possibilities. A report on its success has yet to be produced.
Seniors are incentivized to remain employed through tax benefits. Old-age pensions are not taxed up to the volume of 36 times the minimum income, meaning their incomes can be quite high before being taxed. The tax-free allowance for pensioners is the same as for all other workers. Additionally, new legislation in 2023 raised the minimum for early retirement to 40 years of insurance contributions, up from 35 years. Retirement age will also be set annually for people turning 50, based on the development of national life expectancy.
Following an EU directive of August 2019 on work-life balance and transparent working conditions, a new Czech law will take effect on October 1, 2023, with certain provisions delayed until January 1, 2024. Key modifications include expanded employer information duties, electronic contracting options for labor transactions, rules for remote work, enhanced rights for parent employees, and relaxed formalities for the service of process. Notably, employees can request remote work, and refusal requires a specified reason. Remote work arrangements will require written agreements, with reimbursement rules for expenses incurred. Employers are advised to review and update their labor documentation to comply with the amended requirements.
Employers are required to provide appropriate working conditions for young people, ensuring tasks align with their physical and mental capabilities. Regulations prohibit juvenile workers from engaging in overtime, night work (except for brief educational purposes), or underground work in mining or tunneling. Individuals aged 15 and above who have completed compulsory schooling may be employed. Working hours for young people aged 15-18 are capped at 40 hours per week, with shifts not exceeding 8 hours. Regional branches of the Czech Labor Office oversee decisions regarding the employment of children, ensuring compliance with these regulations.
Citations:
https://eures.europa.eu/living-and-working/labour-market-information/labour-market-information-czechia_en
https://commission.europa.eu/system/files/2023-04/Czechia-CP-2023_EN.pdf
Act No. 281/2023 Coll., on the amendment of the Labor Code (Act No. 262/2006 Coll., as amended) and certain other laws
https://www.czso.cz/csu/czso/cri/zamestnanost-a-nezamestnanost-podle-vysledku-vsps-3-ctvrtleti-2023
https://www.uradprace.cz/web/cz/podpora-zamestnanosti-dlouhodobe-evidovanych-uchazecu-o-zamestnani
To what extent do existing labor market institutions support or hinder the mitigation of labor market risks?
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9
Labor market institutions are fully aligned with the goal of protecting individuals against labor market risks.
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Labor market institutions are largely aligned with the goal of protecting individuals against labor market risks.
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3
Labor market institutions are only somewhat aligned with the goal of protecting individuals against labor market risks.
2
1
1
Labor market institutions are not at all aligned with the goal of protecting individuals against labor market risks.
Existing labor laws in Czechia provide substantial protection to employees by limiting excessive working hours, preventing arbitrary dismissals, and ensuring rights to holidays. However, challenges persist due to the lack of such rights and protections for those outside standard employment contracts and potentially poor enforcement for those with regular employment contracts. The former category includes individuals working under contracts for individual tasks, which encompasses many registered as self-employed. The full extent of such fraudulent forms of self-employment cannot be estimated accurately, but estimates range between 2% and 4% of the labor force. Students and other young people also frequently work under casual contracts with pay levels that start around the subsistence minimum.
A significant amendment to the Czech labor code, incorporating EU directives on work-life balance and transparent working conditions, will take effect on October 1, 2023, with certain provisions delayed until January 1, 2024. These modifications include expanded employer information duties, electronic contracting options for labor transactions, rules for remote work, enhanced rights for parent employees, and relaxed formalities for the service of process. Remote work arrangements will require rights to breaks during working hours and holidays. However, these changes will not affect work under contracts for specific tasks, provided the employer can prove that it is not effectively an employment contract (i.e., fixed working hours, a defined workplace, a hierarchical relationship with an “employer” able to order changes to work tasks). For many in casual work arrangements, it is extremely difficult to challenge the contract they are offered.
The enforcement of labor law is bolstered by the presence of trade unions, which can, and often do, negotiate collective agreements that improve protections and working conditions. Employers have obligations toward worker representatives, including facilitating their activities and providing leave with compensatory wages. Transnational information access rights are also outlined, requiring certain employers to provide information and consultation through European Works Councils or agreed procedures. Union membership in the Czech Republic stands at around 12% of employees, with ČMKOS being the dominant force. Data from 2022 showed that 45% of all employees were covered by collective bargaining, 52% were not covered, and the remainder were unclear. Pay was 17% higher for those covered, and hours worked were marginally less.
Citations:
Act No. 281/2023 Coll. on the amendment of the Labor Code (Act No. 262/2006 Coll., as amended) and certain other laws.
https://www.worker-participation.eu/national-industrial-relations/countries/czech-republic
https://portal.gov.cz/en/informace/rules-concerning-worker-representation-INF-19
https://advokatnidenik.cz/2023/08/28/mohou-se-dohody-o-praci-zmenit-na-svarcsystem/
https://www.czso.cz/csu/czso/struktura-mezd-zamestnancu-2022
A significant amendment to the Czech labor code, incorporating EU directives on work-life balance and transparent working conditions, will take effect on October 1, 2023, with certain provisions delayed until January 1, 2024. These modifications include expanded employer information duties, electronic contracting options for labor transactions, rules for remote work, enhanced rights for parent employees, and relaxed formalities for the service of process. Remote work arrangements will require rights to breaks during working hours and holidays. However, these changes will not affect work under contracts for specific tasks, provided the employer can prove that it is not effectively an employment contract (i.e., fixed working hours, a defined workplace, a hierarchical relationship with an “employer” able to order changes to work tasks). For many in casual work arrangements, it is extremely difficult to challenge the contract they are offered.
The enforcement of labor law is bolstered by the presence of trade unions, which can, and often do, negotiate collective agreements that improve protections and working conditions. Employers have obligations toward worker representatives, including facilitating their activities and providing leave with compensatory wages. Transnational information access rights are also outlined, requiring certain employers to provide information and consultation through European Works Councils or agreed procedures. Union membership in the Czech Republic stands at around 12% of employees, with ČMKOS being the dominant force. Data from 2022 showed that 45% of all employees were covered by collective bargaining, 52% were not covered, and the remainder were unclear. Pay was 17% higher for those covered, and hours worked were marginally less.
Citations:
Act No. 281/2023 Coll. on the amendment of the Labor Code (Act No. 262/2006 Coll., as amended) and certain other laws.
https://www.worker-participation.eu/national-industrial-relations/countries/czech-republic
https://portal.gov.cz/en/informace/rules-concerning-worker-representation-INF-19
https://advokatnidenik.cz/2023/08/28/mohou-se-dohody-o-praci-zmenit-na-svarcsystem/
https://www.czso.cz/csu/czso/struktura-mezd-zamestnancu-2022
Graph View
To what extent do existing tax institutions and procedures support or hinder adequate tax revenue flows?
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The tax system is fully aligned with the goals of ensuring adequate tax revenues.
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The tax system is largely aligned with the goals of ensuring adequate tax revenues.
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The tax system is only somewhat aligned with the goals of ensuring adequate tax revenues.
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1
The tax system is not at all aligned with the goals of ensuring adequate tax revenues.
By European standards, the Czech tax system features a low level of direct taxes, both on companies and individuals, which results in a relatively low share of government revenue in GDP. This significantly constrains the government’s ability to finance infrastructure investment, which has been heavily dependent on EU support – a source expected to decline. Low tax levels reflect governments’ attempts to win electoral support by holding down personal tax levels.
The average income tax rate during the observed period was lower than the OECD average (27%), decreasing from 25.21% in 2020 to 19.70% in 2021 and 19.48% in 2022. These changes were made by the Babiš government before the parliamentary elections in 2021 and during a time of a growing budget deficit due to pandemic measures. The effective average tax rate for businesses was 16.70% in 2020 and 17.0% in 2021, lower than the OECD average of 20%.
The tax system is administered by the Financial Administration under the Ministry of Finance, employing 14,000 individuals, half of whom are engaged in checking tax returns. The administration consistently complains of inadequate resources for countering tax evasion, yet it claims to have identified CZK 37 billion in otherwise unpaid taxes in 2022. Identified serious tax fraud typically relates to VAT, and 867 such cases were referred for legal action in 2022, totaling CZK 5.5 billion. The most serious was the OCTAVIAN case, involving tax evasion of CZK 700 million and taking over eight years to investigate. Eleven individuals finally faced charges for activities in the period 2009 – 2010, although the key figure had yet to be extradited from the UK, where he claimed asylum on the grounds that he could not expect a fair trial in Czechia. According to the Financial Administration, such investigations typically require multi-agency cooperation across several countries, for which only very limited resources are available.
Reducing VAT evasion among smaller businesses remains a controversial issue. To address this, compulsory electronic cash registration was introduced in 2016 for catering and hotels and in 2017 for retail, with plans for expansion to more sectors in 2020. The initiative was always opposed by the ODS and vocal small-business owners, who cited the additional financial burden of purchasing the necessary equipment. The system was completely abolished under the Fiala government at the start of 2024. Opponents argued it was expensive and ineffective. Babiš claimed it had generated CZK 35 billion in extra revenue, though that claim is difficult to verify. While the introduction of electronic cash registers coincided with an increase in VAT revenue, this did not result in a higher share of total tax revenue.
The Financial Administration of Czechia plans to build a new information system, set to be partially operational in 2026, to establish a central database, improve tax collection efficiency, and detect tax evasion.
Citations:
https://www.financnisprava.cz/assets/cs/prilohy/fs-financni-sprava-cr/Vyrocni_zprava_o_cinnosti_FS_CR_za_rok_2022.pdf
The average income tax rate during the observed period was lower than the OECD average (27%), decreasing from 25.21% in 2020 to 19.70% in 2021 and 19.48% in 2022. These changes were made by the Babiš government before the parliamentary elections in 2021 and during a time of a growing budget deficit due to pandemic measures. The effective average tax rate for businesses was 16.70% in 2020 and 17.0% in 2021, lower than the OECD average of 20%.
The tax system is administered by the Financial Administration under the Ministry of Finance, employing 14,000 individuals, half of whom are engaged in checking tax returns. The administration consistently complains of inadequate resources for countering tax evasion, yet it claims to have identified CZK 37 billion in otherwise unpaid taxes in 2022. Identified serious tax fraud typically relates to VAT, and 867 such cases were referred for legal action in 2022, totaling CZK 5.5 billion. The most serious was the OCTAVIAN case, involving tax evasion of CZK 700 million and taking over eight years to investigate. Eleven individuals finally faced charges for activities in the period 2009 – 2010, although the key figure had yet to be extradited from the UK, where he claimed asylum on the grounds that he could not expect a fair trial in Czechia. According to the Financial Administration, such investigations typically require multi-agency cooperation across several countries, for which only very limited resources are available.
Reducing VAT evasion among smaller businesses remains a controversial issue. To address this, compulsory electronic cash registration was introduced in 2016 for catering and hotels and in 2017 for retail, with plans for expansion to more sectors in 2020. The initiative was always opposed by the ODS and vocal small-business owners, who cited the additional financial burden of purchasing the necessary equipment. The system was completely abolished under the Fiala government at the start of 2024. Opponents argued it was expensive and ineffective. Babiš claimed it had generated CZK 35 billion in extra revenue, though that claim is difficult to verify. While the introduction of electronic cash registers coincided with an increase in VAT revenue, this did not result in a higher share of total tax revenue.
The Financial Administration of Czechia plans to build a new information system, set to be partially operational in 2026, to establish a central database, improve tax collection efficiency, and detect tax evasion.
Citations:
https://www.financnisprava.cz/assets/cs/prilohy/fs-financni-sprava-cr/Vyrocni_zprava_o_cinnosti_FS_CR_za_rok_2022.pdf
To what extent do existing tax institutions and procedures consider equity aspects?
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The tax system is fully aligned with the goal of ensuring equity.
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The tax system is largely aligned with the goal of ensuring equity.
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The tax system is only somewhat aligned with the goal of ensuring equity.
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1
The tax system is not at all aligned with the goal of ensuring equity.
The tax administration in Czechia strives to apply the principle of horizontal equity to the extent its resources allow. Taxpayers have the right to appeal tax office decisions, and in 2022, 4,991 individuals exercised this right, with 3,705 appeals related to VAT assessments. Of these, 2,123 were accepted by the tax authorities. Those dissatisfied with the outcomes can file complaints through the court system; 517 did so in 2022, although most of these complaints were rejected.
Vertical equity is a crucial aspect of the personal income tax system. No tax is levied on an amount equivalent to roughly 70% of the average wage. A 15% tax rate applies to income up to 48 times the minimum wage, after which the tax rate increases to 23%. However, this structure adds little to progressivity, as social insurance payments increase with income up to that threshold and are then capped.
Comparatively low corporate tax rates benefit high-income individuals and private companies, many of which transfer income out of the country to lower-tax regimes. In October 2023, the Chamber of Deputies approved a law on equalization taxes to ensure a minimum level of taxation for large multinational and domestic groups. Czechia will require these groups to pay at least a 15% income tax, which is lower than the current effective rate. This move positions Czechia among countries not allowing themselves to become tax havens. However, it does not prevent companies operating in Czechia from finding ways to declare profits elsewhere and avoid Czech taxation.
Vertical equity is a crucial aspect of the personal income tax system. No tax is levied on an amount equivalent to roughly 70% of the average wage. A 15% tax rate applies to income up to 48 times the minimum wage, after which the tax rate increases to 23%. However, this structure adds little to progressivity, as social insurance payments increase with income up to that threshold and are then capped.
Comparatively low corporate tax rates benefit high-income individuals and private companies, many of which transfer income out of the country to lower-tax regimes. In October 2023, the Chamber of Deputies approved a law on equalization taxes to ensure a minimum level of taxation for large multinational and domestic groups. Czechia will require these groups to pay at least a 15% income tax, which is lower than the current effective rate. This move positions Czechia among countries not allowing themselves to become tax havens. However, it does not prevent companies operating in Czechia from finding ways to declare profits elsewhere and avoid Czech taxation.
To what extent do existing tax institutions and procedures minimize compliance and collection costs?
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9
9
The tax system is fully aligned with the goal of minimizing compliance and collection costs.
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The tax system is largely aligned with the goal of minimizing compliance and collection costs.
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The tax system is only somewhat aligned with the goal of minimizing compliance and collection costs.
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1
1
The tax system is not at all aligned with the goal of minimizing compliance and collection costs.
The Czech tax system is rather complicated and has accumulated several exceptions over the years. Complaints about its complexity and the administrative burden have been strongest from small business owners. In 2022, a system was introduced to alleviate this burden, allowing these owners to make a single payment covering both income tax and compulsory insurance contributions. Under this system, following a single declaration, the payment remains constant even if their incomes vary month to month. Although this system was initially welcomed as a good idea, survey evidence suggested that only 7% of small business owners used it in its first year, rising to 10% in 2023. The main reason for the low uptake was that it did not offer significant benefits, suggesting that the existing system was not too complicated to pose serious problems for many.
The tax administration has been accused of being overly rigid, failing to distinguish between mistakes and attempts to defraud. A significant number of cases end up in court, indicating that the cost of litigation is not prohibitive for everyone. Several law firms offer to take up these cases, with costs equivalent to at least ten times the average wage in terms of hours of a lawyer’s time.
Citations:
https://www.financnisprava.cz/assets/cs/prilohy/fs-financni-sprava-cr/Vyrocni_zprava_o_cinnosti_FS_CR_za_rok_2022.pdf
https://www.businessinfo.cz/clanky/pausalni-dan-vyuziva-jen-deset-procent-osvc-jake-jsou-duvody/
The tax administration has been accused of being overly rigid, failing to distinguish between mistakes and attempts to defraud. A significant number of cases end up in court, indicating that the cost of litigation is not prohibitive for everyone. Several law firms offer to take up these cases, with costs equivalent to at least ten times the average wage in terms of hours of a lawyer’s time.
Citations:
https://www.financnisprava.cz/assets/cs/prilohy/fs-financni-sprava-cr/Vyrocni_zprava_o_cinnosti_FS_CR_za_rok_2022.pdf
https://www.businessinfo.cz/clanky/pausalni-dan-vyuziva-jen-deset-procent-osvc-jake-jsou-duvody/
To what extent do existing tax institutions and procedures internalize negative and positive externalities?
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The tax system is fully aligned with the goal of internalizing externalities.
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The tax system is largely aligned with the goal of internalizing externalities.
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The tax system is only somewhat aligned with the goal of internalizing externalities.
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1
1
The tax system is not at all aligned with the goal of internalizing externalities.
The concept of externalities has influenced Czech tax policy, though it has not been the principal driver. The policy has evolved partly in response to pressures from particular interests and input from the EU, which has contributed to the introduction of environmental taxes. While the resulting share of environmental taxes appears high by international standards, this reflects the continued high use of environmentally harmful heating and transport fuels rather than a genuine concern for environmental issues. Vehicles are taxed according to EU emission standards, with the worst offenders incurring significant tax supplements while the best face no extra tax. Environmental taxation, as defined by EU carbon trading rules, has also influenced transport policy, as indicated in the section on Resilient Critical Infrastructure.
Tax deductions are available for firms engaged in research and development (R&D), but these have proven difficult to claim. The number of firms interested fell from 1,306 in 2015 to 835 in 2021, the latest year for which information is available. The problem lies in the stringent conditions for defining R&D imposed by the tax administration and upheld in court judgments. These conditions require systematic activity that leads to something demonstrably new, not merely the adaptation of an existing product. There is no specific targeting to focus on particular areas and their usefulness, although this can be addressed in accompanying policies for research support through subsidies.
Citations:
https://www.czso.cz/csu/czso/danova-podpora-vyzkumu-a-vyvoje-v-roce-2021-dosahla-24-miliardy
Tax deductions are available for firms engaged in research and development (R&D), but these have proven difficult to claim. The number of firms interested fell from 1,306 in 2015 to 835 in 2021, the latest year for which information is available. The problem lies in the stringent conditions for defining R&D imposed by the tax administration and upheld in court judgments. These conditions require systematic activity that leads to something demonstrably new, not merely the adaptation of an existing product. There is no specific targeting to focus on particular areas and their usefulness, although this can be addressed in accompanying policies for research support through subsidies.
Citations:
https://www.czso.cz/csu/czso/danova-podpora-vyzkumu-a-vyvoje-v-roce-2021-dosahla-24-miliardy
Graph View
To what extent do existing budgetary institutions and procedures support or hinder sustainable budgeting?
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Budgetary institutions and policies are fully aligned with the goals of sustainable budgeting.
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Budgetary institutions and policies are largely aligned with the goals of sustainable budgeting.
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Budgetary institutions and policies are only somewhat aligned with the goals of sustainable budgeting.
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1
Budgetary institutions and policies are not at all aligned with the goals of sustainable budgeting.
Czechia is not threatened by budget instability and has implemented rules to ensure ongoing stability. The Czech Fiscal Council, established as an independent body in 2017, oversees and comments on the state of public finances and compliance with legal fiscal responsibility rules. Its membership is dominated by the banking sector, and it typically warns of potential future dangers, as is its remit. The council has welcomed the reduction of budget deficits in the years since the pandemic, while also emphasizing the need for continued deficit reductions to ensure long-term stability.
The state budget has become an issue of internal political controversy, with the Fiala government warning of an imminent and serious threat to budget stability that justified a package of emergency measures. The evidence cited for this threat was an increase in the ratio of gross debt-to-GDP from 30.0% in 2019 to 44.2% in 2022 and 44.7% in 2023, while the budget deficit to GDP ratio was 3.2% in 2022. All of these values are better, or much better, than average by EU standards. Additionally, the debt level in 2019, the base year chosen for the government’s argument, was exceptionally low, while the 2023 level had been matched before. Nevertheless, it was emphasized that debt relative to GDP had been increasing more rapidly than in any other EU member state. This was partly a consequence of exceptionally poor GDP performance, with only 0.2% growth from 2019 to 2022 following poor performance during the pandemic and exceptionally high inflation after Russia’s invasion of Ukraine, alongside slow growth in personal incomes that led to a substantial reduction in real spending and, consequently, both tax revenues and GDP.
The chosen method to reduce the budget deficit includes cuts in spending and increases in taxation, with the former contributing two-thirds of the adjustment. This approach is expected to lead to only a slight further reduction in demand, which will be more than offset by a return to wage growth and increased consumer spending alongside declining inflation. The Ministry of Finance predicts that GDP will grow by 1.9% in 2024, following a 0.5% decline in 2023, and that the budget deficit will fall to 3.64% of GDP in 2023 and 2.2% in 2024. Debt, however, will still be rising. It is acknowledged that these predictions could be overly optimistic in light of unforeseen external events.
Changes on the revenue side include an increase in the tax on companies from 19% to 21%. This is judged to have minimal effect on company behavior and possibly to be beneficial for the balance of payments current account, which suffers from increasing repatriation of profits by multinational companies. A further element is a windfall tax on increased profits of energy companies and banks to cover the costs of supporting consumers through the energy price crisis. This too should have no significant disincentive effect, but strong doubts have been raised over whether estimates of the revenue it will raise are exaggerated.
A range of other tax changes will reduce the VAT bands from three to two, increase property tax, and make changes to personal income tax.
Significant changes on the spending side include weaker indexation for pensions, a 2% cut in funding for public sector pay, and sweeping reductions in subsidies to enterprises. All of these carry implications for other government objectives.
The adequacy of pensions is discussed in the Old-Age Poverty Prevention section. Public sector pay can influence recruitment into, and hence the quality of, essential activities such as education and research. Subsidies have also been important for adapting the economy toward reducing carbon dependence.
Any such negative consequences may be partly offset, at least for a few years, by the EU-funded National Renewal Plan (Národní plán obnovy, NPO), which offers the equivalent of 1.5% of the 2023 GDP to be allocated by 2026 for projects in digital transformation, infrastructure and green transformation, education and training, research and development and innovation, health, and some other areas. This will be in addition to the support under existing Structural Funds for 2021 – 2027, equivalent to 9% of 2021 GDP over the seven-year period.
Citations:
Fiskální výhled České epubliky. 2023. Ministerstvo financí ČR. Listopad 2023. http://www.mfcr.cz/FiskalniVyhled
https://www.mfcr.cz/cs/rozpoctova-politika/makroekonomika/makroekonomicka-predikce/2023/makroekonomicka-predikce-listopad-2023-53576
The state budget has become an issue of internal political controversy, with the Fiala government warning of an imminent and serious threat to budget stability that justified a package of emergency measures. The evidence cited for this threat was an increase in the ratio of gross debt-to-GDP from 30.0% in 2019 to 44.2% in 2022 and 44.7% in 2023, while the budget deficit to GDP ratio was 3.2% in 2022. All of these values are better, or much better, than average by EU standards. Additionally, the debt level in 2019, the base year chosen for the government’s argument, was exceptionally low, while the 2023 level had been matched before. Nevertheless, it was emphasized that debt relative to GDP had been increasing more rapidly than in any other EU member state. This was partly a consequence of exceptionally poor GDP performance, with only 0.2% growth from 2019 to 2022 following poor performance during the pandemic and exceptionally high inflation after Russia’s invasion of Ukraine, alongside slow growth in personal incomes that led to a substantial reduction in real spending and, consequently, both tax revenues and GDP.
The chosen method to reduce the budget deficit includes cuts in spending and increases in taxation, with the former contributing two-thirds of the adjustment. This approach is expected to lead to only a slight further reduction in demand, which will be more than offset by a return to wage growth and increased consumer spending alongside declining inflation. The Ministry of Finance predicts that GDP will grow by 1.9% in 2024, following a 0.5% decline in 2023, and that the budget deficit will fall to 3.64% of GDP in 2023 and 2.2% in 2024. Debt, however, will still be rising. It is acknowledged that these predictions could be overly optimistic in light of unforeseen external events.
Changes on the revenue side include an increase in the tax on companies from 19% to 21%. This is judged to have minimal effect on company behavior and possibly to be beneficial for the balance of payments current account, which suffers from increasing repatriation of profits by multinational companies. A further element is a windfall tax on increased profits of energy companies and banks to cover the costs of supporting consumers through the energy price crisis. This too should have no significant disincentive effect, but strong doubts have been raised over whether estimates of the revenue it will raise are exaggerated.
A range of other tax changes will reduce the VAT bands from three to two, increase property tax, and make changes to personal income tax.
Significant changes on the spending side include weaker indexation for pensions, a 2% cut in funding for public sector pay, and sweeping reductions in subsidies to enterprises. All of these carry implications for other government objectives.
The adequacy of pensions is discussed in the Old-Age Poverty Prevention section. Public sector pay can influence recruitment into, and hence the quality of, essential activities such as education and research. Subsidies have also been important for adapting the economy toward reducing carbon dependence.
Any such negative consequences may be partly offset, at least for a few years, by the EU-funded National Renewal Plan (Národní plán obnovy, NPO), which offers the equivalent of 1.5% of the 2023 GDP to be allocated by 2026 for projects in digital transformation, infrastructure and green transformation, education and training, research and development and innovation, health, and some other areas. This will be in addition to the support under existing Structural Funds for 2021 – 2027, equivalent to 9% of 2021 GDP over the seven-year period.
Citations:
Fiskální výhled České epubliky. 2023. Ministerstvo financí ČR. Listopad 2023. http://www.mfcr.cz/FiskalniVyhled
https://www.mfcr.cz/cs/rozpoctova-politika/makroekonomika/makroekonomicka-predikce/2023/makroekonomicka-predikce-listopad-2023-53576
Graph View
How committed is the government to utilizing research and innovation as drivers for the transition to a sustainable economy and society?
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9
The government is clearly committed to utilizing research and innovation as drivers for the transition to a sustainable economy and society.
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The government is largely committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
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The government is somewhat committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
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1
The government is not at all committed to utilizing research and innovation as drivers for the transition toward a sustainable economy and society.
The government has made verbal commitments to improving research and innovation, but questions remain about the likely effectiveness of the proposed policies. Additionally, there is no strong orientation toward sustainability.
The most recent strategic document on research and innovation, “Czech Republic The Country For The Future,” was developed by the Council for Research, Development, and Innovation within the Government Office under the Babiš administration. The stated aim was to increase R&D spending from 1.79% of GDP in 2019 to 3% of GDP by 2030, with 1% from the public sector and 2% from the enterprise sector. However, spending has been fairly stable for some years, with public spending at around 0.65% of GDP since 2011. This figure places the country in the middle of the EU and OECD ranges, reflecting spending in universities and research institutes.
In 2021, the last year with complete data, 59% of public spending was dedicated to fundamental research, mostly in the natural sciences. A weakness has been the relatively low level of research in enterprises, which has also remained fairly stable. Larger firms with modern technology are typically branches of foreign-owned multinationals. With a few exceptions, these firms have little interest in moving research activities to Czechia. Nevertheless, they dominate enterprise research spending, with the largest share in the automotive industry. For example, the Škoda car manufacturer, owned by Volkswagen, has a significant research facility, although it is not involved in developing the company’s most modern technologies.
The government’s plan does not address this issue and does not specify priority sectors or activities. The Council for Research, Development, and Innovation does identify successful research areas and has established a subcommittee for research on climate change issues, but it focuses on discussing research rather than its applications in the enterprise sphere.
Large, foreign-owned companies in 2021 received CZK 1.5 billion of the total CZK 2.4 billion in tax support. In contrast, of the CZK 3.8 billion in direct subsidies, CZK 3.3 billion went to domestically owned firms.
Further support for research is threatened by dependence on EU funding and by the government’s prioritizing of spending cuts to reduce public debt. The NPO promises CZK 5 billion to support research and innovation in enterprises, conditional on the establishment of a coordinating group for that activity. Goals under this heading are vague, and no bids had been invited by February 2024.
Citations:
https://www.czso.cz/csu/czso/statni-rozpoctove-vydaje-na-vyzkum-a-vyvoj
https://vyzkum.gov.cz/FrontClanek.aspx?idsekce=866015
The most recent strategic document on research and innovation, “Czech Republic The Country For The Future,” was developed by the Council for Research, Development, and Innovation within the Government Office under the Babiš administration. The stated aim was to increase R&D spending from 1.79% of GDP in 2019 to 3% of GDP by 2030, with 1% from the public sector and 2% from the enterprise sector. However, spending has been fairly stable for some years, with public spending at around 0.65% of GDP since 2011. This figure places the country in the middle of the EU and OECD ranges, reflecting spending in universities and research institutes.
In 2021, the last year with complete data, 59% of public spending was dedicated to fundamental research, mostly in the natural sciences. A weakness has been the relatively low level of research in enterprises, which has also remained fairly stable. Larger firms with modern technology are typically branches of foreign-owned multinationals. With a few exceptions, these firms have little interest in moving research activities to Czechia. Nevertheless, they dominate enterprise research spending, with the largest share in the automotive industry. For example, the Škoda car manufacturer, owned by Volkswagen, has a significant research facility, although it is not involved in developing the company’s most modern technologies.
The government’s plan does not address this issue and does not specify priority sectors or activities. The Council for Research, Development, and Innovation does identify successful research areas and has established a subcommittee for research on climate change issues, but it focuses on discussing research rather than its applications in the enterprise sphere.
Large, foreign-owned companies in 2021 received CZK 1.5 billion of the total CZK 2.4 billion in tax support. In contrast, of the CZK 3.8 billion in direct subsidies, CZK 3.3 billion went to domestically owned firms.
Further support for research is threatened by dependence on EU funding and by the government’s prioritizing of spending cuts to reduce public debt. The NPO promises CZK 5 billion to support research and innovation in enterprises, conditional on the establishment of a coordinating group for that activity. Goals under this heading are vague, and no bids had been invited by February 2024.
Citations:
https://www.czso.cz/csu/czso/statni-rozpoctove-vydaje-na-vyzkum-a-vyvoj
https://vyzkum.gov.cz/FrontClanek.aspx?idsekce=866015
Graph View
How committed and credible is the government in its activities to guide the effective regulation and supervision of the international financial architecture?
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9
9
The government is clearly committed to ensuring the stability of the global financial system.
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7
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The government is largely committed to ensuring the stability of the global financial system.
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The government is somewhat committed to ensuring the stability of the global financial system.
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1
The government is not at all committed to ensuring the stability of the global financial system.
Czechia is not a significant player in international financial affairs. At best, it follows the initiatives of others. Its main banks are foreign-owned, and their independent international involvement is limited.
The country is a member of the European Union Agency for Criminal Justice Cooperation (Eurojust) and, since 2008, has joined international investigation teams. While the country is not a tax haven, many of its businesses choose to be formally registered in low-tax jurisdictions, often obscuring actual ownership.
Domestic financial stability is overseen by the Czech National Bank, which conducts macro stress tests across all segments of the domestic financial sector to confirm its resilience. The share of nonperforming loans to total gross loans has been decreasing steadily: it was 1.7% in 2021, 1.46% in 2022, and continued to decline in 2023. Similarly, nonperforming loans provided by units included in the general government have also shown a decreasing trend, amounting to 0.49% in 2020 and 0.43% in 2021.
Citations:
Česká národní banka – Zpráva o finanční stabilitě – jaro 2023/ Czech National Bank - financial stability report – spring 2023.
The country is a member of the European Union Agency for Criminal Justice Cooperation (Eurojust) and, since 2008, has joined international investigation teams. While the country is not a tax haven, many of its businesses choose to be formally registered in low-tax jurisdictions, often obscuring actual ownership.
Domestic financial stability is overseen by the Czech National Bank, which conducts macro stress tests across all segments of the domestic financial sector to confirm its resilience. The share of nonperforming loans to total gross loans has been decreasing steadily: it was 1.7% in 2021, 1.46% in 2022, and continued to decline in 2023. Similarly, nonperforming loans provided by units included in the general government have also shown a decreasing trend, amounting to 0.49% in 2020 and 0.43% in 2021.
Citations:
Česká národní banka – Zpráva o finanční stabilitě – jaro 2023/ Czech National Bank - financial stability report – spring 2023.