Income tax reform - The example of negative income tax

The principle of negative income tax stems from the idea of "guaranteed income". The construction of negative income tax is based on the principle that the tax is paid only by those taxpayers who reach a specified level on income. Those with income below such a level would be entitled to receive financial support (negative tax) from the government. Negative income tax links taxation with social security payments. It means the abolition of social security insurance and requires tax authorities to merge with social security institutions. On the practical level, negative income tax supposes the replacement of existing taxes. Negative tax should secure not only a minimum income level, but also stimulate the economic activity of taxpayers. Negative income tax is not currently used in any country. If the Czech Republic decided to introduce it, the country would bear the high costs associated with any radical and innovative tax reform, which, in this case, would also be combined with a restructuring of the whole of the social security system.