At the end of last week, the government went ahead with its plan to scrap the highly popular flat-rate tax system and replace it with higher taxes for the rich, at least that is the rhetoric, but it remains to be seen just how much the changes will affect thousands of sole traders, for instance.
As part of the plan, the government, or rather its so-called Solidarity and Development Council, set an earnings threshold at EUR 3,246 a month over which self-earners will be subject to a 25% income tax rate. The news was announced on Thursday by PM Robert Fico, who insists that the measure will affect just 1% of the Slovak population. The same deal is being slapped on constitutional officials, even if they don’t pass the set threshold.
The flat-rate tax system introduced by the government of Mikulas Dzurinda proved almost revolutionary as the 19% rate across the board helped combat various speculative bookkeeping practices. Now, though, PM Fico says “there is no place for a flat-rate tax system in today’s world”. Corporate entities generating over EUR 30 million a year also had their income tax rate hiked up from 19% to 23% recently, while utilities have been hit also be a new tax system.
The sharp knife of Fico’s master plan aimed at generating enough money to plug the public finance deficit will also be cutting into smaller earners, i.e. people making EUR 1,200 a month (12% of the population, claims Fico), by raising the payroll levy base, and it now looks like a 14% tax will be introduced on dividends.
Anyone who is naive enough to believe that all the tax hikes and scrambling for revenue instead of trying to make cuts and raise the efficiency of public finances will not affect them, is in for a shock. The domino effect of increased expenditure for companies, banks, etc. will hit all of us, rich and poor, through food prices, energy prices, loan rates and so on. This is the secondary effect, though, so no direct blame in the end when people find making ends meet harder.
Flat rate tax is socially and morally unfair. PAYE, or ‘Pay As You Earn’ is obviously a fairer syatem of taxation. The argument against Fico is that, as before, he is pretending to be a socialist. Where is the point in increasing the taxes of just 1% of the taxpaying population? Surely the costs of adding such a tier to the tax system will outweigh or negate the increased tax revenue?
The man is a fake.
PAYE? , National Insurance? Come on now, this is Slovakia. With a total population less than some metropolitan areas of cities and a working population of what 2 – 2.5 million the concept of a single, efficient revenue collection agency would be regarded as witchcraft. Who ever dreamt up the current system should have been sectioned. The Sk way is to have as many non-jobs in as many agencies as possible to make everything, tax, health insurance and pensions as complicated as possible. As I have pointed out before, with one in three of all workers employed directly or indirectly by the state, BnM has plenty of scope for savings and efficiency but that would not be the “socialist” way. It is far easier for his govt. to raise taxes and levies than have to show the door to family, friends, cronies and hangers-on. It’s obviously far better to have legions of ineffective paper shufflers than an efficient, lean state machinery that is cost effective, performs well, is easily monitored and reduces the state budget substantialy and to finance the current circus rather than to actually make the real political decisions this country needs to get out of the mire.
Cuts? Efficiency? Words not in BnM’s vocabulary. His socialist dream world will be financed by the decent hard working Slovaks and foreign investors/firms while the non-jobs, paper shufflers and “return the favour” appointees carry on as normal. Whoever voted this clown into office will have no course to complain as their lot becomes harder and the country decends into oblivion. The “vote for me, I’ll increase your pensions” election promise is not going to taste so good when the miniscule “pay off” is overwhelmed by price increases.
As my dear old Gran used to say ” You can’t educate pork!”