The employee is an expensive toy?

Posted by bara 12/03/2014 at 14h14

In the Czech Republic without a doubt yes! Staff costs are due to the secondary costs among the highest in the world. Additional costs mean that employers have of their "pocket" go beyond the costs of salaries and other remuneration of employees have significant additional amount in the form of social security and health insurance, which go to the state budget. Social insurance should be synonymous with security of current and future retirees. Unfortunately Retirement Account makes a growing deficit and the situation will not be sustainable. It is only a few options to resolve the situation and that is raising (increase) the retirement age or reducing the amount of retirement. In the Czech Republic, the employer pays premiums more than they contribute to their security by the employee. This system is relatively rare, because in the most countries is opposite situation.
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Premiums paid by the employer are equal to 34 % of gross wage. Czech employers must consider whether take on new people or raise wages, because every crown is for employers three times more expensive. Czech employers pay on their employee’s one of the highest insurance.
 
Where secondary costs are causing problems?
 
The first issue is the development of Schwarz system, which means hiring business with a trade license for certain jobs. For these workers, the employer does not pay the above-mentioned 34 % of the gross wage. It is not surprising that a business license is desired commodity for employers and for employees who do Schwarz system. Much of the entrepreneurs pay minimum payments in the amount of CZK 1,752 for health insurance and 1894 crowns for social insurance for the year 2014. However, while the low down payments are not reflected on the quality of health care, they get significantly lower pensions. These entrepreneurs must the retirement age to save otherwise. 
 
Some employers paid only official minimum wage (currently 8,500 crown) and the remainder in cash (untaxed!). This is big problem too. These "half black" employees should therefore also have to postpone some of the savings at a time when not employed. The secondary costs influence foreign investors in deciding the location of new investment projects. Czech Republic has advantage in terms of location in the heart of Europe. But high labour costs are big disadvantage and investors often choose another state.

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Record unemployment in the Czech Republic

Posted by bara 25/02/2014 at 13h20

Unemployment exceeded the 600,000 people in the Czech Republic and this is the highest record number from establishment of the independent Czech Republic. Job offices registered 629,274 people in January, which are 32,441 more than that in December.  
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January is traditionally the month with the highest unemployment. The reason for this is the employees who were terminated term contracts and agreements in seasonal jobs such as construction or agriculture. This rule was confirmed in this year although winter was mind. This records also include self-employed persons, who finished business.
 
In January, the unemployment rate increased by 0.4 percentage points from 8.2 percent to 8.6 percent. The number of Women looking for job is 297,235 (47.2% of total unemployed) and number of persons with disabilities looking for job is 60 700 (9.6 % of total unemployed). It means that for one job are 17 job seekers. The lowest unemployment rates are in the districts Prague - East (3.6%), Prague - West (4.4%), Mladá Boleslav (4.9%), Prague (5.4 %), Plzeň - South (5.8 %) and Rokycany (5.8 %). 40 districts reported the proportion of unemployed people moving around the national averages. The highest unemployment rates are in the district Bruntál (15.2 %), Jeseník (14.6%), Most (14%), Ústí nad Labem (13%), Znojmo and Karviná (both 12.8 %).
 
Slight fall in unemployment can be expected in the second half of this year, when the economic recovery would be reflected in the labor market.

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Tax system

Posted by bara 07/02/2014 at 14h55

In the Czech Republic, a person whose taxable income is higher than 15,000 CZK, during the calendar year, has to always report his Czech personal income tax return. In most of the cases employers are responsible for carrying out this duty for their employees. There is a possibility to claim tax reductions for paid mortgage interests, paid life insurance, gifts and tax deductions for dependent spouse and dependent children. A joint tax return of married couple is not possible in the Czech Republic since 2008. People have to submit their income tax return till April 2. There is possibility to extend the date of submission to July 1, but only if it is prepared by a registered Czech tax adviser. 
 
Czech citizens or people who have a permanent residency in the Czech Republic have to pay tax on their income earned inside the Czech Republic and abroad. Foreign residents and people employed in the Czech Republic only have to pay tax on their income earned in the Czech Republic. Personal income tax is paid by employees and small businesses or so called self-employers. The personal income tax rate is a flat rate of 15%. Employers are obliged to deduct tax advances under a payroll deduction scheme. Self-employers pay tax advances by themselves and file an income tax return every year to settle any differences between the amount due and amount advanced. 
 
There are general tax credits which can be claimed in the Czech Republic. Tax credit of 24,840 CZK per year can be claimed for the taxpayer. Czech tax residents and also Czech tax non-residents who have more than 90 percent of the income from Czech sources can claim tax credit of 13,404 CZK annually per dependent child. Tax credit of 24,840 CZK can be claimed for a spouse whose own income does not exceed 68,000 CZK per year.

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Mortgages in 2013

Posted by bara 28/01/2014 at 12h49

The year 2013 has been really record-breaking in interest rates for mortgage loans. The lowest average interest rate dropped to 2.95 percent. From a statistical point of view, the last year was the most successful in history for mortgage banks. The total volume of new mortgage loans exceeded the limit of 150 billion Czech crowns and pushed away previous record from 2007, when banks provided mortgages in total amount of “only” 142 billion crowns. Increased demand for mortgage loans was caused mainly due to low interest rates and too low property prices.
housing and finance
 
Record from 2007 is somewhat misleading, since it ignores the newly opened market in the form of refinanced loans. If we really count only recently closed mortgages, they yea 2007 will continue to be a record yea. Banks provided mortgages worth of 142 billion crowns, but only about five percent of them consisted of refinanced loans. In 2013, however, refinanced mortgages - by the most common expert’s estimates - comprised a third, so banks provided really new mortgages for only 100 billion crowns.Czech National Bank shall publish statistics of refinanced loans to the public after July 2014. Statistics will include data relating to the refinancing of loans for consumption, housing and other loans. Refinancing loans are a great attraction for banks - mortgage boom, although it did not happen last year yet, however, it was extremely successful for banks, because they had a fight with their competing offers about 50 billion crowns of refinanced mortgages from a hundred thousand clients.
 
What kind of development can be expected in 2014? Mortgages could still be a priority for the bankers. For now we can see the preservation of favourable interest rates and if the long-awaited recovery in the real economy will come, may be the year 2014 will be again a record in many ways.

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Car insurance

Posted by bara 14/01/2014 at 14h39

Due to increasing competitive pressures,the amount of compulsory insurance for several years been reduced. Now is the opposite situation. Since this September insurers are obliged to pay at least 3% of the premium income of the Fund to the loss prevention. These funds will be distributed among firefighters, rescue workers and persons involved in projects increasing road safety and will be used to buy or upgrade equipment.

car in hand

Another reason is the rise of compulsory insurance , the new Civil Code, which entered into force on 1 January 2014, and increased demands on motorists claims. The right to compensation  will have indirect participants equally like direct participants. Insurance companies will have to spend big  sums on these claims , which will be assessed individually . In year 2013 family of someone who died could get only 240, 000 crowns but this year are compensation unlimited.  Czech Insurance Association estimates that the cost of insurance will increase by three billion per annum.  The rise of car insurance is form „hidden tax“.

Way to avoid the more expensive car insurance  is when you use fixation price of car insurance to three years . The advantage is that car insurance will be for the three years more expensive then in these days. The disadvantage is that insurance companies offer fixation of price only for premium products what are much more expensive then clasic variant of car insurance. When you selecting  car insurance you need to use common sense and only select the alternative product that would meet our needs . If the client negotiates insurance the cheaper option , it is possible that during the three years to pay premiums less than it would cost premium option with price fixing. General rule regarding car insurance, mortgage,, vendor selection energy or the mobile operator is that we must choose product variants that meet our specific needs, and we must not be fooled by overpriced products of certain financial institutions whose possibilities we will not be able to use it.

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APR - the lowest number on the poster with the greatest value for consumers

Posted by bara 02/01/2014 at 13h56

The annual percentage rate is a key indicator of loan pricing. Loans are with him among themselves exactly comparable and we can better understand financial jungle. Abbreviation APR means annual percentage rate, indicates the percentage of the amount due, which the consumer has to pay for period of one year in connection with a loan, their administration and other expenses associated with their drawing. It therefore includes all costs which are associated with the loan. We can see the difference between the interest rate and the APR here. 
 
Other costs associated with the loan are:
  • charges relating to the assessment of loan applications ,
  • fees for the contract ,
  • management fees for loan,
  • fees for account maintenance 
  • fees related to the transfer of funds,
  • the first installment overcharge,
  • payment protection insurance, etc.
For improve consumer´s protection, providers must show RPSN in their bid since 1 January 2002. If the provider fails to meet this obligation, he faces from supervisory authorities sanction. A similar obligation applies to providers in other EU countries, as is clear from Directive 98/7/EC. They downplay the importance of the APR or they try to camouflage in the form of tenders 
proclaiming: APR from … ( very confusing prepositions – your APR will be probably different number). They report APR like very small font in background their bid. This provider´s behavior have reasons, because who would brag the real amount that you will must pay for your loan.
 
The amount of APR depends on amount of the loan, repayment period and the number of installments. Generally speaking, the smaller amount borrowed for a shorter period, the APR is higher. We can compare the APR only in offers with similarly high loan to a similarly long time!

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New Civil Code

Posted by bara 11/12/2013 at 13h38

Since 1.1.2014 entry into force of the new Civil Code will bring a lot of changes.  Many years judges and people called for a significant modification of the Civil Code, because the current civil code is fragmented and it was adopted in 1964. Since then Czech Republic and its legal system has changed considerably. After ten years, when the new Civil Code has been created, the Czech Republic end up being more modern and democratic with handling of private relations, where the emphasis is on personal rights, the principle of free will and unity in the commitment to the law. The unification of rules is the main objective of the new Civil Code.

paragrafRange of topics in the new Code is really wide and it accompanies us from birth to death. Significant changes were made in inheritance law. You may be able to bequeath picture to museum, money to charity and stamp collection to grandson.

Legatee is not an heir and therefore the testator's debts do not pass to him. Legatee or so does not become a party to the probate proceedings and dependent items can pass to his legacy before the heirs. Newly assets may refer to the condition that the child will inherit only after he will graduate from college. Conditions but the law partially corrects the deceased could not legatee or heir posthumously bully - such condition divorce and many more would be invalid. Code strengthens the will of the testator Institute strengthening the will and the introduction of inheritance contract. In addition there will be heirs’ expansion from four classes to six and also state can be an heir. Newly also creditors will be more satisfied because while today's heirs have to pay the debts of the deceased to the extent of inherited property, according to the new Code they will have to pay debts in full extent ( if they don’t refuse  the inheritance).

Other changes occur in family law, which governs the joint property of spouses, the ability to adopt an adult person or 16 years old person can apply for a grant of legal age. The changes will also undergo tenancy arrangements, such as the deposit will be negotiated up to six times the monthly rent, if there is a gross breach the owner will have the right to terminate the contract without notice and he does not need to arrange housing for tenant as compensation.

The new Civil Code also seeks to consolidate ownership of the land and buildings standing on it. Now it is possible that house and land had different owners. In future the same person must be owner of house and owner of land. The new Code provides that the animal isn´t a thing.

Under the new Civil Code when somebody attacks an animal, attacker has to pay a treatment of the animals and owners emotional injury. The emotional costs are related to the special “price of popularity” - when someone intentionally destroys for example family photos, which have tremendous value for the owner, he will have to pay the "price of popularity". Under today's law you are entitled to a maximum of photos production costs. Special price of popularity may yet be variable and it depends on the court.

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Currency depreciation is step for us or against us?

Posted by admin 02/12/2013 at 19h36

 

In the scenario, the exchange rate of the Czech crown shifts close to CZK 27/EUR and is thus much weaker than in the baseline scenario. The weaker exchange rate level is reflected in an increase in import prices, which pushes up both headline and monetary-policy relevant inflation. This is followed by faster resurgence of inflationary pressures from the domestic economy. Inflation thus returns to the CNB’s target in 2014, then moves into the upper half of the tolerance band around the target and approaches the target slowly from above during 2015. The temporary overshooting of the inflation target in this scenario offsets the significant undershooting in 2013 and 2014 and facilitates an exit from the zero lower bound on interest rates through a decline in real interest rates. Turning to GDP, there are several contrary factors fostering a recovery in economic activity overall in 2014 and, by contrast, reducing economic growth in 2015. At its monetary policy meeting on 7 November 2013, the Bank Board decided unanimously to leave the two-week repo rate unchanged at 0.05 %. Interest rates will be kept at their current levels (i.e. at “technical zero”) over a longer horizon until inflation pressures increase significantly. The Bank Board also decided to start using the exchange rate as an additional instrument for easing the monetary conditions. The CNB will intervene in the foreign exchange market to weaken the Czech crown so as to maintain the exchange rate of the Czech crown against the euro close to CZK 27/EUR. Owing to this decision, the scenario of using the exchange rate has become the most likely description of expected future economic developments.

According to many economic experts, currency depreciation is a wrong step, because Czech economy has slightly started to recover in recent months. President Miloš Zeman and last president Václav Klaus identify themselves with these statements and they also don´t agree with interventions of ČNB. Václav Klaus, who appointed members of the Bank Board, said that ”interventions have very questionable effects, but very disputed costs”.

According to the Bank Board this step is appropriate and in case of monetary policy inaction, the economy would revive considerably slower.

Experts’ criticism on the head of CNB is based on the argument that the central bank wants “to encourage shopping spree” by this abrupt rise in the price because it declares that it won't be cheaper in the future. Economists, however, are not sure who has to start spending, because people with above-average incomes will not be affected by rise of goods around 4%, they will still shop as always. A further group are households that have problems with their incomes and live from paycheck to paycheck, or living on loans or reserves (according to statistics, there are around 40 % of them). For these households CNBs statement is meaningless, since they are not forming any savings. Other households won’t also start to shop from the Czech National Bank anticipated reserves, but only hasten Christmas shopping, as for example in electronics stores there are still same prices, but it doesn’t mean that they are shopping this way all year.

Companies are feeling uncertain, since they don’t know whether the interventions will be mitigated or even pass away. However, the CNB currently doesn’t intend to change its decision, because it is expecting increase of economic growth, which should help to save the jobs of people that due to the price level they were supposed to loose, if CNB didn’t make this intervention. Decline in prices of purchased goods and services, which is at the level of individuals as consumers seemingly positive fact, is at the level of the national economy extremely harmful and unwelcome phenomenon. However, many businesses are dependent on imported goods and raw materials from abroad and therefore these items will become more expensive for them and they will be forced to lay off.

An ordinary consumer won’t notice any change in price within cheap goods. The largest price increase will be visible mainly in expensive goods. In the price of a new car from abroad, for example around half a million Czech crowns, consumers may notice a rise.

For example: “I want to buy a new car for 20,000 €. In the original rate (25.8 CZK ) it should cost about 516,000 CZK. In the new rate (27 CZK) it will be about 540,000 CZK. The difference is 24,000 CZK.” explains economist at Credit Home Michal Kozub.

Next ugly aspect of currency depreciation for households is exchange crowns to the euro. For example: when I want exchange 10,000 CZK-in the original rate (25 CZK) I get 400 €. In the new rate (27 CZK) I get only 370 €. There is difference 30 € = 800 CZK.

Opinions of experts on this issue are radically different and only result of growth of the Czech economy will actually prove if CNB had the correct assumptions.

 

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iPhone Application

Posted by admin 14/10/2010 at 14h12

Our iPhone application for sMoneybox has been released in AppStore, you can download it "here":http://itunes.apple.com/us/app/smoneybox-spending-tracker/id396025601.

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Collaborators Wanted

Posted by admin 26/04/2010 at 14h16

We are looking for collaborators to help us with the development of sMoneybox application, who would administer the forum and all language versions. If you are interested, don't hesitate to contact us on info@smoneybox.com. Thank you.

 

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