By Phillip J. Bryson (auth.)
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Extra info for The Economics of Centralism and Local Autonomy: Fiscal Decentralization in the Czech and Slovak Republics
When the Czech system was introduced in 1993, there was a balanced reliance by the policy designers and policymakers of the republic on direct and indirect taxes. After the socialist period, in which taxes were by and large hidden, it took some administrative courage to introduce direct taxation to a reluctant populace. The most prominent indirect tax in the Czech Republic is the value-added tax. It has two rates, 5 percent for necessities and 22 percent for other commodities and services. The top rate is the second highest among transition countries (Martinez-Vazquez and McNab, 1997, p.
However, it has signaled the emergence of property ownership and guaranteed the “irreversibility of the political changes carried out after the year 1989” (Mikloš and Žitˇnanský, 1997, p. 88), and it has provided newly restructured ﬁrms with some insulation from state intervention. Early in the transformation process, the hope was that privatization would transfer low-productivity properties from the state’s ﬁnancial and managerial burdens to the lists of higher-productivity taxable properties.
Nor have the regions received a mandate to assist small municipalities lacking the resources to manage their administrative functions independently. Perhaps this lack of an assisting link between regions and the many small municipalities was deliberate in the reform effort, so that the continued paucity of resources in the small towns will continue to be justiﬁcation for the traditional centralism favored in Prague. However, given the practical and sensible nature of the Czech people, it seems apparent that as the municipalities develop local capacity, the center will support greater local autonomy.