BRATISLAVA, October 19, (WEBNOVINY) – The opposition in the Slovak Parliament sharply criticizes the draft amendment to the income tax law, which effective from the beginning of next year would introduce several changes in the tax area, including the abolition of the flat tax system. In the debate to the draft, MP for the SDKU-DS Ivan Stefanec called the amendment a bad and unfortunate step, because according to him, achieving additional revenue for the treasury through higher tax rates is more than questionable. He claims that there is no direct correlation between raising tax rates and higher government revenue. He mentioned Lithuania as an example and said that after a similar step with a higher tax rate, the country only collected 59% of the planned revenue. Stefanec said that when Slovakia introduced the flat tax rate system, it brought an increase in real income of citizens by 2 percent and a drop in unemployment below the 10-percent.
Stefanec sees another negative impact of the approval of higher taxes for high income private individuals and legal entities in deterioration of the situation for small business owners who create most jobs. He thinks that the current government is only endangering their existence by its actions. Large firms will not have a problem to move paying taxes elsewhere, as opposed to the smaller ones, which will only mean further shortfalls in their disposable income. Stefanec suggests as a viable path to effective consolidation in cost savings in state enterprises and public administration offices. At the end of his speech, Stefanec proposed to parliament to discontinue the discussion on the draft. „I consider this bill a step back,“ he said.
On the other hand, MP for the governing party SMER-SD Lubos Blaha called the flat tax system an experiment for developing and post-communist countries such as Albania, Jamaica, and Mongolia, while the most advanced countries in terms of living standards such as Canada, Sweden, and Australia have a progressive income tax. He also claimed that the flat tax cannot be credited with rising living standards and a decline in unemployment in the pre-crisis period. The economic situation in Slovakia and the world according to him, was quite different than today.
The draft amendment to the income tax law increase the tax rate in corporate income tax from 19 percent to 23 percent. In the case of natural persons the 19 percent rate is to apply for the tax base up to 176.8-times the current subsistence level, beyond which the tax rate will be 25-percent. The higher the tax rate should apply to people whose monthly income exceeds approximately 3,300 euros. The amendment also limits the applicability of 40-percent flat-rate deductible expenses for the self-employed. It introduces for them the maximum deductible amount of 5,040 euros per year, or 420 euros per month.
SITA