The Czech Republic could learn a lot from the Hungarian government when it comes to pro-family policy, with Hungary introducing a range of innovative solutions to combat demographic decline, including a lifetime abolition of income tax for mothers with three or more children.
This tax measure is already in place for women with four or more offspring but Hungary recently decided it didn’t want to stop there and expanded the option to mothers with three children as well. Although Hungary is a close neighbor, the Czech government has not yet decided to take such bold steps despite our country’s own dire demographic situation.
While a Hungarian tax revolution for families also has a political motivation, it can indeed increase birth rates. If it is successfully implemented, the policy will make a significant contribution to saving the country’s pension system, which is being financed from the pockets of the economically active population and companies.
The courageous Hungarian proposal appears to come at a time of severe tax difficulties of the Czech government, which partly has to do with the number of economically active people decreasing in the Czech Republic, providing a smaller pool to draw taxes from.
At the same time, the number of pensioners is growing and the pension system is expected to face difficult times ahead.
Despite this reality, government policy in the Czech Republic is not pro-natal, thus it does not support an increase in birth rates that would prevent natural population decline.
The birth rate is around 1.7 children per mother in the Czech Republic, which is below replacement level, a problem seem in many European countries. Instead, the population is increasing mainly due to migration from countries such as Ukraine and Slovakia, leaving those countries with their own demographic predicaments to contend with.
Even the recent increase in children’s benefits from the Czech government cannot be seen as a real incentive to have more children. It is just a modest benefit to help average families survive, especially at a time when living costs are dramatically rising and housing prices are breaking records.
Other countries in the region are already taking a cue from Hungary. Poland has pursued a tax policy to help young people, and hopefully help them establish families, when it abolished income tax for young employees up to the age of 26 as long as their income does not exceed a set level.
Meanwhile, there are no sign of such brave and innovative ideas stemming from the Czech government. The government’s strategy is fundamentally short-term focused and opportunistic.
Not only do Czech politicians lack the courage for real strategic reforms that would boost healthy economic development, but they totally lack the ability to look beyond the horizon of the next elections.