Distribution impact of the mortgage interest deduction in the Czech Republic

JAHODA, Robert and Jana GODAROVÁ. Distribution impact of the mortgage interest deduction in the Czech Republic. Review of European Studies. 2014, vol. 6, No 2, p. 110-119. ISSN 1918-7173. Available from: https://dx.doi.org/10.5539/res.v6n2p110.

Basic information

• Original name: Distribution impact of the mortgage interest deduction in the Czech Republic
• Authors: JAHODA, Robert (203 Czech Republic, guarantor, belonging to the institution) and Jana GODAROVÁ (203 Czech Republic, belonging to the institution).
• Edition: Review of European Studies, 2014, 1918-7173.

Other information

• Original language: English
• Type of outcome: Article in a journal
• Field of Study: 50200 5.2 Economics and Business
• Country of publisher: Canada
• Confidentiality degree: is not subject to a state or trade secret
• RIV identification code: RIV/00216224:14560/14:00073596
• Organization unit: Faculty of Economics and Administration
• Doi: http://dx.doi.org/10.5539/res.v6n2p110
• Keywords in English: microsimulation; personal income tax; revenue forgone method; EU-SILC; tax expenditure
• Tags: International impact, Reviewed

Abstract

This paper focuses on the mortgage interest deduction for owner-occupied housing in the Czech Republic. The main research question concerns the distribution of personal income tax liability given the rather generous interest deduction for owner-occupied housing loans and changes to it when restrictions are placed on the interest deduction in 2014. We used data for the Czech Republic from the EU-SILC surveys for our analysis. We estimated the value of this tax expenditure at approximately CZK 4.1 billion in 2011, with more than half the amount spent by the lowest two deciles in income distribution. Personal income tax reform is legislated to begin in 2014, one part of which will be a cap on loan interest. This reform will lead to a decrease in the yearly value of the tax expenditure but will be followed by an increase in the PIT rate. Taken together, this will generate greater tax expenditures. Our computations show that the impact will be negative on households in the highest decile, while other groups will feel some benefit.

Links

• GAP403/12/0366, research and development project: Name: Identifikace a evaluace regionálně specifických faktorů úspěšnosti reforem v duchu NPM ? země CEE
• MUNI/A/0784/2013, interní kód MU: Name: Vybrané aspekty hodnocení efektivnosti a zásluhovosti veřejných politik (Acronym: Aspekty VEPO)

Investor: Masaryk University, Category A