Czech Republic may increase tax on cigarettes and tobacco; alter employees' food voucher system

It's part of a recent tax package passed by the Czech government which also alters food voucher benefits and several other factors

Samantha Tatro

Written by Samantha Tatro Published on 23.06.2020 09:18:00 (updated on 23.06.2020) Reading time: 2 minutes

The price of cigarettes and tobacco may increase in the coming years, according to a report in iDnes. 

It’s part of a recent tax package passed by the Czech government which also alters the employee food voucher system as well as supplement a proposal for self-employed people and businesses following the coronavirus pandemic. The package will need to be approved by parliament as well.

From 2021 to 2023, the exercise tax on cigarettes and tobacco could increase by five percent each year. Preliminary estimates suggest the increase would bring more than two billion crowns to the budget in 2021 and 1.9 billion crowns in 2022 and 2023.

In addition, employees who receive food vouchers would have the option to pick money instead of the vouchers. Employers can now provide a meal allowance directly in cash. These meal allowances are exempt from taxes and insurance premiums.

Officials clarified that the addition of money does not make any changes to the current system. It only adds another option.

“If [employers] pay the same amount of money instead of colored paper, they will get rid of high fees and unnecessary paperwork. However, if the current model suits them, they can stay with it and nothing will change for them,” Minister of Finance Alena Schillerová told iDnes.

If the parliament approves the proposal, the food stamp business would see a significant change. Restaurants and pubs pay high commissions (anywhere from five to seven percent) to meal vouchers companies, at the expense of their own profits.

By adding a cash option, restaurants will save time on paperwork and bureaucracy.

The government first introduced this tax advantage for companies to support company meals. Less than half of all employees, though, have the option to use company meal vouchers, while another 1.5 million receive meal vouchers. About one million employees do not use the benefit.

The tax package also helped supplement a proposal for self-employed people and companies in the Czech Republic as well. The proposal helps reduce their tax base on income taxes as a part of the coronavirus pandemic.

“We want to support everyone who helped fight the spread of the disease,” said Schillerová. “Many companies immediately switched to veils or other medical devices and supplied them free of charge where they were most needed. The pandemic has raised a huge wave of solidarity in our country and we value it very much.”

Taxpayers will be able to claim their expenses from March 1 to May 31, 2020, as if they were for a business.

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