The Prague Post Online: Opinion: The myth of the selfish driver

December 1st, 2008

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The myth of the selfish driver

Even the strongest skeptic of global warming can see the waste of time and energy caused by gridlocked traffic
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June 6th, 2007 issue

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By Tracy Dove

My tulips bloomed in early March this year. I was able to hear the birds working diligently at building their nests in February, and I could have mowed the lawn at any time since Christmas but didn’t. The world is getting warmer; there is no argument over that, and everyone is trying to do their fair share to reduce their personal impact on the atmosphere.

But cars — we can’t seem to get out of our cars, it seems. And sometimes the traffic in Prague gets so bad that even the most convinced skeptic of global warming can at least see a tragic waste of time and energy lost to gridlock. The drivers aren’t happy either, but there they sit and wait, looking pinched and displeased at the hopelessness of their situation, and all that is left to do is wait for an R.E.M. moment to develop when everyone simply gives up and gets out of their cars to abandon them on the congested highways and intersections of Prague.

“Take the bus, buddy!” This is what we users of public transportation want to shout at those selfish Octavia drivers, but is the solution really that easy? And is there anything that we should be worried about in that R.E.M. music video? I must confess I am one of those righteous recyclers and I, too, see the one-person-to-a-car ratio during rush hour as an indignant thumbing of the nose at spaceship Earth and a horrible insult to my prematurely awoken garden.

But one of the hats I have worn in this town is a baker’s hairnet, and, as an owner of Bohemia Bagel, nine years of business have taught me something about our oversimplification of the car trauma that our city faces every day. The reason that people are not getting out of their cars and into the buses, dear readers, is simply because many of them can’t.

Let me explain. It all starts with the country’s tax matrix, and, when this is combined with the unique high-growth, low-wage category that this country finds itself in, we are presented with some interesting accounting options we can choose from to make the best out of every crown spent on wages.

Let’s take the wages first. Unfortunately for them, there is no way that the rising bourgeoisie can be paid anything close to what our neighborly Austrian or German earns, although upward pressure on wages here continues to drive these numbers ever higher. Still, middle management can command only around 50,000 Kč ($2,370) per month on average, while upper management might see six figures if they get with the right company.

Since even these wages are still comparatively low on a West European level, Czech-based companies are forced to compensate for the difference in some way, and the preferred method of choice is offering nonmonetary benefits to prospective employees. Most of these benefits appear in the form of a car, a notebook, or a phone — and not uncommonly all three are used to augment the base salary, which is intentionally low and for good reason.

Why not just give them more money? Well, now we return to the tax side of the equation. Employers pay a whopping 36 percent of every crown spent on labor to the government in the form of social and health taxes — which are not unlike what we pay into our U.S. social security system, only scarier.

Now, if our upper manager is making 100,000 Kč a month, that means that the company pays 36,000 Kč to the government, which is quite a lot; but if our upper manager were to get 200,000 Kč — which is still below the Northern Alpine average — then the employer contribution becomes even more overwhelming. The idea is to keep payroll taxes as low as possible while attracting good human resources, and the way to do this is to buy employees … things.

The lesson isn’t over. Let’s say an employee’s car costs 500,000 Kč, for simplicity’s sake. That price includes 19 percent DPH, or value-added tax, and this can be written off one-to-one against any other 19 percent DPH purchases the company makes. That means that even if the company in question pays no corporate income taxes in this country, it still gets all of this money back, as long as it made purchases including DPH.

So the car actually cost the company roughly 400,000 Kč — quite a discount that average citizens can’t get for themselves. And this goes for anything else the company buys to pad the pay package, since any monetary payment to an employee is immediately subject to tax. These things are amortized and act as pleasant offset mechanisms against paying corporate income taxes, which, even at 24 percent, are high in comparison with other countries.

Are you doing the math? So far, our company has gotten out of paying a higher wage, while augmenting its inventory of tax write-offs as well. Now, let’s get to the employee: Obviously, having a car and a phone means that you can use them together when you get stuck in traffic on your way to work, but the vehicle and phone are not limited to official use only; the employee has also been given the right to employ these things for personal use.

Have you ever wondered why everyone at the gas station wants a gas receipt? Each full tank of gas means more DPH to write off and another expense, but it also means that the employee is getting the fuel and the tool to wheel his family to Pardubice — or anywhere else they may want to go — for free. It’s all on the company’s dime.

Understandably, to not use the car means to lose it. If the employee is suddenly caught with a low gas receipt, or is seen taking the metro to business meetings, a general hum of disapproval will prevail, not so much because the employee is a thankless shmuck, but because his selfishness might endanger the future of all things purchased that make their appearance as benefits to other employees.

Without these benefits there are more taxes to pay for everyone, and since the image of the taxman here still has Brezhnev eyebrows and an “eeny, meeny, miny, moe” tax-collection strategy, no one wants to pay any extra if he or she doesn’t have to. So, in the end, all of the lanes and lanes of leased Octavias prevail, and they will continue to hold our pavement down from 7 a.m. to 7 p.m. every workday, and no one will be the better for it.

Tax reform is the only answer. Read my lips: Lower the taxes, and people will pay them. While, in the current political situation, lower taxes seems about as likely as Paris Hilton doing 45 days in jail, it still seems proper to place the blame where the source of the problem lies.

To micromanage the traffic problem the way London has with the city toll policy is a wonderful idea, but it doesn’t solve the problem.

At least indirectly, we can say that because of taxes, and not thanks to them, more people are driving to work than ever before.

— The author is director of marketing and recruitment at the University of New York in Prague and is the editor of the online publication Russia Today, www.russiatoday.com. He pens the column, The Naked Historian, for www.uspoliticstoday.com. He has two cars, but claims to use them in emergency situations only.

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