OVERVIEW OF FISCAL DECENTRALISATION
The government in Czechia is organised in a three-tier structure: the central government, 14 regions and 6,250 municipalities. Prague has a special statute and is considered both a region and a municipality. For the purpose of this study, municipalities and regions form the sub-national government level.
Legal acts governing fiscal decentralisation
The basic status of territorial self-governance is established in the 1992 Czech Constitution. The regions as they are defined today were introduced with a major reform adopted under Act 347/1997. The system of regional government is regulated by Act 129/2000 Coll. The system of municipal government is regulated by Act 128/2000 Coll. On Municipalities. The system of regional government is regulated by Act 129/2000 Coll.
Qualifying fiscal decentralisation
Regions and municipalities have under state law both autonomous responsibilities, over which they have considerable freedom with regards to financial and legal aspects, and delegated responsibilities, which need to be executed according to central government guidelines.
Municipalities are autonomously responsible mainly for pre-elementary and primary education, local social welfare, environment, public housing, public transports and local roads. The major source of revenue for municipalities is local taxes – shared taxes (notably VAT, which contributes to 40% of overall tax revenue) and non-shared taxes (mostly the real-estate tax, the marginal rate of which can be set discretionally by each municipality). Other municipal own resources come from fees and charges for local services (14% of total local revenues).
Regions are autonomously responsible for secondary education, regional road networks, regional economic development and healthcare. Regions have a lower revenue autonomy compared to municipalities, as their major source of revenues are transfers from the central government. Regions are only entitled to shared taxes with the major tax revenues, analogously to municipalities, coming from VAT.
Overall in 2018, considering both municipalities and regions, sub-national expenditures in the Czech Republic accounted for 30% of total government expenditures (see the pie chart below). The sub-national level had a transfer dependency ratio of 42% in 2018.
Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.
LEVEL OF FISCAL DECENTRALISATION
Revenue autonomy (own revenue relative to total resources available) at the local level (regions and municipalities) is higher than the EU average (59% versus 53% in 2018), which entails a rate of dependency on central government transfers that is below the EU average (42% versus 48% in 2018). Local own revenues represented18% of total government revenues in 2018, a value marginally higher than the EU average (13%).
Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.
The composite ratio, which captures aspects of fiscal decentralisation of both revenues and expenditures, suggests that sub-national governments in the Czech Republic have a degree of fiscal decentralisation (25%) that is higher than the EU average (16%).
Deficit and debt at sub-national levels
In 2018, the consolidated gross debt of the Czech local government sector amounted to 1.6% of GDP, having decreased during the last four years by 0.8 percentage points.
Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.
EXPENDITURE BY GOVERNMENT LEVEL AND BY POLICY AREA
Expenditures of regions and municipalities represented a significant part of total general government expenditures in the areas of environmental protection (86%), housing and community amenities (74%), education (66%), and recreation culture and religion (58%) in 2017.
Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.
Regional and municipal spending has been particularly concentrated, and more so than the EU average, in the fields of education (28% of the total budget of both entities in 2017) and of economic affairs (18% in 2017). Other relevant areas of spending in 2017 were health (14%) and general public services (12%).
Source: authors’ elaboration on EUROSTAT data. For further details, see methodology.
