Urgent news: Taxation of employee benefits announced by the Czech government could put tens of thousands of skilled jobs at risk

Published On: 11. 5. 2023

The taxation of employee benefits announced by the government may cause serious damage to the Czech economy, in addition to a decline in the rate of their provision and a related increase in employee dissatisfaction, tens of thousands of skilled jobs could be at risk. Benefits are a very important tool for employers to improve the conditions of their employees and thus alleviate the high taxation of labour that prevails in the Czech Republic. By taxing them, this advantage will disappear, and thus the competitiveness of the Czech Republic will again decrease somewhat in comparison with countries such as Poland, Romania, Ireland or Portugal, which are considered by IT and business services investors as suitable destinations for establishing and operating their branches.

According to the OECD labour taxation in the Czech Republic is 39.82%, but only 33.62% in rival Poland and 34.72% in Ireland, another country that has also long been on the radar of investors. This is the percentage of the cost that each employee pays to the state in taxes, including social security and health insurance, in relation to the total wage bill paid by the employer.

We are aware of the need to consolidate public finances and make savings, but we consider the taxation of employee benefits to be a tool that can do more harm than good. Our research shows that high taxation on labour and rising overall operating costs are one of the reasons why many investors will prefer to move to another country to create an IT or business services centre with hundreds of skilled jobs. Similarly, around 25% of local centres are worried about having to move their operations to a more cost-effective location,

says Jonathan Appleton, director of ABSL Czech Republic, an association of IT, business and customer services companies.

The industry currently represents around 160,000 skilled employees. So if 25% of the industry were forced to go abroad, it would mean a loss of more than CZK 13 billion a year in state levies alone.