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.