Posted by on 3 Oct 2012. Filed under Current Affairs, Top news. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

Time To Face Income Tax Hikes

The government has pushed through its planned hike in corporate and personal income taxes, with part of the opposition claiming the measures will cost the average person around EUR 700 more in taxes per year.

The adjustment of income tax rates is intended to plug the public finance deficit by raising an average of around EUR 500 million in additional revenues a year over the next three years (2013-2015). The move is part of the government’s so-called consolidation package, which concentrates almost totally on increasing income from various sources, but it is companies and individuals who will pay the real price in the end.

By hiking corporate income tax from 19% to 23%, there are increasing fears that more and more companies will move their company residence somewhere else, because this combined with a 14% health insurance levy on dividends suddenly makes doing business in Slovakia less attractive.

MP for KDH Julius Brocka claims that for the average person on an average wage (around EUR 700) the changes to personal income tax will cost them more than a month’s salary in additional income tax per year. Higher earners with a monthly salary over EUR 3246 will see their tariff rise from 19% to 25%.

The self-employed are also set to be hit, as now only EUR 400 or so per month will now be acknowledged the flat rate 40% deduction for expenses.

19 Comments for “Time To Face Income Tax Hikes”

  1. A non Eu friend i know recently re-applied for his residency, and dually presented his tax returns as evidence. (Prepared by a friend of his Slovak partner), who is obviously not so aversed to the dark arts of Slovak tax avoidance. The inspector nearly choked and coughed up a lung, before saying ‘no one in this town pays that much tax, your accountant must be an idiot’… he’s now looking into registering his consultancy in the Cayman’s. Incredible..

    • Losgar

      slimsedg it might be possible that you don’t know what you talk about, right?

      Just shooting in the dark, hearing horses approaching? Dark art of tax avoidance? There is nohing like that! Either it’s legal or it’s illegal. There is nothing in between.
      If your friend’s friend doesn’t know how fill in the tax form then he should ask somebody else.

  2. Dave C.

    The tax everthing that moves policy will almost certainly bite BnM on the dupka. Business will find the Sk less and less attractive not only because of the tax and insurance hikes but because many medium and small manufacturers rely on “dohoda” staff which give them flexibility to repond to fluctuations in demand. The cost of creating full time posts will be to heavy a burden so they will close or move. The overall reduction in average disposable income will have a terminal effect in the retail and service sector, long established small retail businesses are closing up shop in ever increasing numbers now as demand dwindles and that can only get worse once the tax increases take effect. The high street here in Presov is becoming a ghost town, shops and commercial premises are closing daily, units in the “shopping centres” and new builds that have stood empty for months/years are even less likely to attract tennants. Slovak shoppers are becoming more frugal and “home made or grown” is more and more popular. Poultry keeping and gardening are the only growth areas around here and there has been a marked decrease in pub going and eating out. Any projected increase in revenue from the current batch of policies is going to have a major hole in them as unemployment rises, spending continues to fall, property prices continue their downwards spiral and more money has to be found for state benefits. The state TV company has found 300 posts that it does not require to function and it is clear that similar cuts could be made in almost every element of the public sector yet there have been no major cuts in state funded jobs, some have been awarded pay rises. Which brings me to my last point – I have to agree with Marcy – the average wage around here is Eu. 350 a month so where this figure of Eu. 700+ comes from I don’t undertsand, indeed an article in Novy Cas last month showed the national disparity in wages comparing the regions to BA. The average worker here in the east will be seriously considering if it is worth working at all, that’s if he/she has a job to go to!

    • George M

      Chris DC, you do live in the arse end …Presov ??? What are you doing there, going mad ??

      Yes increasing Taxes does further limit disposable income , decrease the pub going, eating out, and buying of white goods, all that effects jobs .

      To another point …the salary Slovaks earn . The amount of 350 euro would seem low , but perhaps you are correct . The real problem is that Slowvaks can get real comfortable living on just 3/400 euro a month. There is no real ambition in most of them …own some chickens, a pig, a sheep and living in the same dull, unmaintained, unrenovated house with some land that their parents or grandparents built ,heated by wood logs seems to be utopia to them. A visit to dentist seems beyond most of them .

      You can get people out of poverty, but can you get poverty out of peoples minds ?

    • Donal Greene

      If you cited Novy Cas as a source, your point loses all value! :)

      But on a serious note, you have a point that in the east, there is a jobs crisis. But this has nothing to do with tax. The simple fact is that 70% of the Slovak economy is in Bratislava and until the citizens of Slovakia embrace a more entrepreneurial spirit and try to be creative and start businesses rather than be content to move to BA and work for IBM/Dell etc and work for a paltry salary then nothing is going to change. Politics only has a certain amount to do with this. The power is with the people and if the population are uninspired then the politics is hardly going to be any better.

      • Dave C.

        Donal – Sorry about Novy Cas!

        I have to disagree about the tax issue. Don’t forget the last government increased the tax on property rental income and added insurance payments to them. Many of the properties I mentioned belong to Presovites now working / living in BA and they have upped rents to finance their increased costs which has become an unsustainable overhead to the tennants. The same is true of resident property owners who have seen their “real” income skydive and it fair to assume that rents will increase again to offset the new tax burden. The average rental per sq. metre has doubled in three years here but sales have remained almost stagnant. As disposable income continues to fall the situation can only become worse. On the jobs front – I quickly realised that the east is the poor relation of the BA region and that successive govts. have done nothing to address the imbalance but it does not help if prospective businesses are faced with rediculous rents for premises or the artificial barriers to EU funding that seem to have been put up here. There is plenty of entreprenual spirit here and some excellent business opportunities but no help to get enterprises started and the forthcoming tax hikes are going to destroy what few have. Be under no illusion, one thing I admire about the Slovaks is – if they don’t have the cash they don’t spend it, BnMs policies will cause a downturn in the entire economy and everyone from US Steel to Marian’s Corner Cafe will suffer.

  3. David

    Not the right decision.
    Completely unbalanced inn terms of revenue raising.
    Not enough on expenditure retrenchment. I know Miklos already did some pruning, but I’m sure there’s a bit more fat on the bone which can be trimmed.
    The ‘dohoda’ changes are catastrophic.
    Instead of 22%, now totalling 48%, so those who want to work a few hours extra,without getting a zivnost….no point.
    As for Ficp pushing through PFI…in the UK they’ve turned out to be part of Gordon Brown’s patheric legacy…the running costs of PFI hospitals and schools are astronomical, but plenty of money to be creamed off for cronies in “consulting” firms etc.

  4. marcy

    JH-surely i dont and u do. Just continue living in denial and believe just how well people in Slovakia live.

  5. Donal Greene

    why don’t you tell me why it is not the right move and I’ll dissect your argument and make you look like an idiot like I usually do?

    • R Hill

      Its the right thing to do as much of the deficit is due to Slovakia being downgraded by the rating agencies.This made it more expensive to borrow. If the deficit is reduced then in theory the cost of Slovak gov borrowing is reduced and more money stays in the country rather than enriching bond investors.

    • George M

      Me ? Why Duckie, ah ha , you don`t actually know why `it is the right move, now do you? There you go again an Open Uni graduate in 2025 ….what was the degree again in …Hand Washing ???

      Perhaps you missed the story Duckie ? Not everyone is Self Employed or quite so blatant, as to be involved in utter Tax avoidance perhaps, as Mr Hill. The government has pushed through its planned hike personal income taxes, that will cost the average person around EUR 700 more in taxes per year. The average person on an average wage (around EUR 700) the changes to personal income tax will cost them more than a month’s salary in additional income tax per year. Higher earners with a monthly salary over EUR 3246 will see their tariff rise from 19% to 25%. QED. This combined with a 14% health insurance levy on dividends and by hiking corporate income tax from 19% to 23%, there are increasing fears that more and more companies will move their company residence somewhere else and suddenly even makes doing business in Slovakia far less attractive.

      Perhaps you should also note after that lecture, tax hike plans do not create jobs ! As many as 700,000 Slovaks (13 percent of the population) were living in or on the verge of poverty in 2011, representing an increase by 50,000 people in real terms on the last year .

      Fico and his so called Socialist agenda of more Tax will hit the poor,
      the pensioners, or households with at least three children, single parents, children and youths under 17 years of age……. and also women alone. These are at the highest risk of sliding into poverty. ie Companies leave Slowvakia, no tax is paid to the treasury…..but you have to find more Social Benefits in your coffers, or cut others vital services . No Chance of this government getting rid of all the crony non jobs or making savings .

      Austerity programs do not work, period !

      • R Hill

        You may disagree with his policies Fico is nobodies fool. If what you described happens then he will lose the next election. I suspect his government know this as well as you do.

        The rich wont pay unless they want to as they can avoid taxes. So why should they bother moving location. The large companies will have been consulted and there will be loop holes.

        Those on benefits wont pay more as they they dont earn an income.

        It’s a squeeze of the middle earning suckers and small businesses presented as a raid on the rich. It’s aim is to reduce the deficit by

        1) Increasing revenue.
        2) Reducing borrowing costs

        If this works it will make Slovakia an EU poster child and it probably brings Slovakia into Eurozone norms for tax rates, a condition of receiving EU funding for infrastructure and education projects and the like which benefit everyone.

        The overall cost of doing business in Sk will still be lower than other countries in the Eurozone but Sk should not aim to be a low cost country for ever.

        • George M

          No Ones fool Fico?……yea like all Slowvaks he offers huge bribes (to the voters), never really delivers and they the dummies accept, praying for something better that will never happen, because it was impossible?

          Mr Hills, do you think that a squeeze of the middle earning suckers and small businesses, and presented as a raid on the rich, going to achieve the aim is to reduce the deficit ???

          Actually, we tried austerity in 1929, 1930, 1931, 1932, 1937, 2008, and 2012. Every single instance led to more pain and more debt. It took years extra and billions extra to recover from the mistake of austerity in the 30′s. One thing , Obama’s stimulus prevented a depression and turned the USA GDP positive in just two quarters. Their economy has lost momentum as the effects of the stimulus died. Now, we’re back in austerity-ville, on the road to Recession Round II. Too bad there are so many people who cannot learn from history and they insist on repeating the same mistakes, expecting a different result this time.

          The concept is very simple. ARITHMETIC. Save, during a sunny day, for a rainy day. and NOT the other way around.

  6. Donal Greene

    Actually in 2010, the average salary was 769e and the average in Bratislava was 1100e. But like Richard has said, anyone with a decent accountant can pay VERY little tax per year.

  7. George M

    Pray tell Mr Duckie, how is this `the right move` …well in your world ?

  8. R Hill

    Should not make a bit of difference with a decent accountant. It’s just the suckers on PAYE who will cough up.

  9. marcy

    Average wage 700 Euros? Are they trying to be funny? Average wage in slovakia is 350-550 Euros a month. Quite shamefull but true.

  10. Donal Greene

    It’s a tough decision but the right move.

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