Government Package: How We Will be Financially Affected?

Starting January next year, we will feel the impact of the proposed government measures to improve public finances. These measures include the abolition of nursery fees, a reduction in the spouse tax credit, the introduction of sickness insurance, changes to tax brackets, an increase in social security contributions for self-employed individuals, an increase in property tax, and an increase in excise taxes and changes in VAT.

The financial impact of the proposed measures will vary for different groups of people. Let’s briefly review the most significant changes that will have a “negative” effect on each household.

Employees will again pay 0.6 percent of their gross salary for sickness insurance, resulting in an annual loss for a married couple with a combined monthly income of 80,000 crowns. The reintroduction of sickness insurance would amount to 5,760 crowns per year.

Families with children will face additional financial burdens. The spouse tax credit for a spouse who takes care of a child older than three years in the household will be abolished, resulting in a loss of 24,840 crowns. Moreover, families with children in nursery school will lose the nursery fee tax credit, which currently amounts to the minimum wage for the given year.

Housing costs will also increase as property tax will double from the current level and continue to increase annually with inflation. Additionally, the water, sewage, and district heating VAT will increase from 10 percent to 12 percent. The tax rate for waste disposal will increase from 15 percent to 21 percent.

People with a home savings account will experience a reduction in government subsidy. Currently, at 2,000 crowns per year, the maximum contribution will be halved to 1,000.

The proposed changes in VAT rates will affect various expenses. Beverages, including infant and mineral water, will be subject to the standard 21 percent VAT rate. Medicines will be taxed at 12 percent, resulting in increased costs. The price of alcohol, hairdressing services, and newspapers will also rise due to the higher VAT rate. Smokers can also expect higher costs, with a 10 percent increase in taxes on cigarettes, tobacco, and cigars in 2024, followed by an additional 5 percent increase over the next three years.

Other expenses will also see an increase. The annual highway vignette will become 800 crowns more expensive, reaching 2,300. Diesel consumption tax will increase by 1.50 crowns per liter.