- the introduction of new tools of active employment policy for reducing the frictional
unemployment - the tightening of conditions on the long-term unemployed – they have to agree to carry out eight
hours of community-useful jobs a month, in order to keep their entitlement to social benefits - subsidies for employers promoting the creation of new jobs in regions that are worst affected by
unemployment
Besides above-mentioned changes, government tries to increase the flexibility of graduates to suit the
needs of quickly changing society and quickly changing labour market requirements. The objective is to
create an open system of continuing education which should restrict neither the providers of education
nor those who want to be educated. The aim is to strengthen the links between initial and continuing
education.
Other measures concerning the labour market:
- pensioners, women on maternity leave are allowed to work, either as employees or entrepreneurs,
while keeping their pensions - reduction in marginal effective tax rate for lower income employees (see annex)
Improvement of business and investment environment consists mainly of tax burden reduction for
the businesses, support of research and development and programmes oriented towards small and
medium-sized enterprises and towards support of technological and business centres (see annex). The
corporate income tax rate is gradually being reduced; in 2004 to 28%, in 2005 to 26% and in 2006 to
24%. Since January 1, 2005 the time period for the depreciation of movable property is shortened. This
measure is partially offset, e.g. by restricting the option to depreciate a loss from 7 to 5 years.
2. Implementation
22.1. Strengthening institutional framework for conduct of fiscal policy
The Organic Budget Law No. 218/2000 specifies the budgetary process and principles in the Czech
Republic. In 2004 the amendment of this Law was approved (No. 482/2004). This amendment brought
stronger control over public finances, reduction of public finances fragmentation and introduction of
binding medium-term expenditure frameworks. The complex of measures introduced by this amendment
will make a significant contribution to the reinforcement of aggregate fiscal discipline, improvement of
allocation efficiency of public budgets and the so-called operational effectiveness of government-
controlled organisations.
The most important change is the introduction of fiscal targeting, based on medium-term fiscal outlooks,
applicable both to the state budget and state funds, and binding medium-term expenditure frameworks
based on the mentioned outlooks.
The medium-term fiscal outlook for the state budget includes the government ́s expectations an
intentions concerning revenues, expenditures and balance of the state budget and state funds (in
particular intended changes of laws and other legal regulations), expected total revenues and
expenditures of the state budget (subdivided by chapters) and state funds for individual years,
programme expenditures and participation of the state budget in their funding and expenditures needed
for programmes or projects co-financed from the EU budget (subdivided into individual chapters of the
state budget and state funds).
(^2) Spending and revenue reforms have already been mentioned in previous chapter.