Vague tax plan stokes fears (The Slovak Spectator)

zaviesť superhrubú mzdu pre The Slovak Spectator dňa 14.3. 2011 chválil Radovan
Ďurana z INESS. Kritický však bol voči zvyšovaniu odvodov pre živnostníkov
a dohodárov.

Vague tax plan stokes fears (The Slovak Spectator)

ANY KIND of reform tends to please one group while making
others nervous. After the government presented a limited peek at the changes it
is considering making to Slovakia’s ways of calculating income taxes and
mandatory payroll taxes, those who are classified as employees are more hopeful
of a boost in monthly take-home pay, while the self-employed are alarmed about
what they perceive as a potentially much heavier tax burden.

An expert quickly pointed out that higher taxes on the
self-employed and those working under Slovakia’s system of one-off contracts
might damage flexibility in the labour market and suggested that the government
should first exact more severe cuts in state spending rather than taxing any
kind of labour more heavily.

The Iveta Radičová government said it is being driven by its
goal of developing a unified system for collection of income taxes, customs
duties and mandatory payroll taxes. The prime minister said that this would
simplify the overall system and ease some of the administrative burdens on
employees as well as employers.

The government stated that there are significant differences
in the current methods used to calculate taxes on those who are considered
regular employees of businesses as opposed to those who are self-employed.

that an average employee generates about €5,200 in annual
taxes while those who are self-employed pay an average of €1,700. The
government said its proposed changes will address this imbalance.

Almost 230,000 self-employed people may see their net income
drop based on the details released thus far, in particular a proposed increase
in the calculation base for mandatory payroll taxes, as well as an effective
increase in the base for payment of income tax. The latter would rise as the
self-employed would no longer be able to deduct from their gross earnings what
they pay as mandatory

contributions to Slovakia’s social insurer, Sociálna
Poisťovňa, and to health insurers, the SITA newswire wrote.

Another of the proposed changes is a so-called super-gross
wage for those who are employees, meaning that employees’ gross income will be
increased by the sum that is transferred to the social insurer and to the
health insurer by the employer.

“A one-time positive
is the installation of the super-gross wage which will make financial relations
between the citizens and the state more transparent,” Radovan Ďurana of the
INESS economic think tank told The Slovak Spectator. “We are also positive
about the efforts to increase the net income of low-income employees.
Nevertheless, we negatively assess this increase in income [for lowincome
employees] being covered by heavier taxing of self-employed and contract workers.”

Ďurana said he
expected such a change would decrease flexibility in the labour market and have
a negative impact on employment growth.

“We think that the
government should be reducing the payroll tax burden of employees and not
increasing it flatly to other groups,” said Ďurana. “A reasonable solution
would be to install a ceiling for annual income from [contract] agreements.”

He said that reducing
payroll taxes for those who are traditional employees should be financed
through additional cuts in public spending.

Viola Kromerová of Slovenský Živnostenský Zväz (SŽZ), which
represents self-employed trade and craft workers, said her organisation in no
way agrees with the statement of the government that those who are
self-employed are benefitting at the expense of employees.

“Why isn’t it so then that employees are paying the expenses
of people for whom the state is paying the payroll taxes?,” asked Kromerová.

Kromerová suggested that the state should publish a detailed
analysis which would show who is taking how much from the system.

“We think it is necessary to tell the whole truth,”
Kromerová told The Slovak Spectator. “Certainly, the self-employed are drawing
the least from the social insurer and the health-care system.” Kromerová said
that at this point her organisation is looking at the proposal with great
concern even though it has not yet been stated by the government what it will
use as the basis for payroll taxes on those who are self-employed.

“In no way do we agree that the selfemployed are comparable
with an employee and it does not workthis way in any state,” Kromerová said.
“The self-employed must be clearly looked at as an employer and employee at the
same time.”

Kromerová stated that self-employed persons, in their role
also as an employer, guarantee their businesses with their own property and
often the whole family’s property. She said that self-employed persons must
secure orders, material, equipment and technology while being responsible for
both themselves and any employees they may have.

“They often struggle to keep afloat in the market,”
Kromerová said.

Most importantly those who are selfemployed are potential
employers, according to Kromerová.

Actual numbers are

Radičová stated that the increase in payroll taxes for
self-employed persons would not nearly reach the payroll tax burden of regular
employees who have the same type of position and the same earnings.

“We do not want to burden those who belong to the group with
lower incomes or to the group of employees,” Radičová said, as quoted by TASR.

It appears that there is already an intense debate within
the four parties of the coalition government over the potential changes, with
Most-Híd and the Christian Democratic Movement (KDH) already expressing some

“If the result is that they [self-employed persons] go to
register at the labour office, this is what we do not want to achieve with the
changes,” said KDH deputy Július Brocka, as quoted by Sme.

Meanwhile, Finance Minister Ivan Mikloš floated the idea of
a tax bonus for those who are self-employed while also floating another
proposal to assess a lower percentage rate for social insurance payments for
those who are selfemployed, at 13 percent rather than the current 16 percent,
Sme wrote.

The government insisted that its main goal is to tune the
country’s system so as to make it easier to initiate its future system of
unified collection of income taxes, mandatory payroll taxes and customs taxes.

“Unified collection
of taxes and levies is a commendable goal but one should not get the impression
that it is possible only when self-employed, contract workers and employees are
paying the same rates from the same calculation basis,” Ďurana said.

He said optimising on
part of the state is already possible without any further reform of the payroll
tax system.

“The installation of
the super-gross wage and unification of the place of collection will at the
same time reduce bureaucracy, which [both] employees and self-employed face,”
Ďurana said.

Ďurana added that
installing quite extensive technical changes to achieve unification of tax
collection without proposing a plausible reduction in the payroll tax burden is
in fact wasting a chance.

“The goal of the
reform should be easing the burden on labour, any labour,” he said. ”It is one
of the few tools through which the government could support the growth of

Beata Balogová

Slovak Spectator, 14.3. 2011

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