BRATISLAVA, July 22, (WEBNOVINY) — Nearly eight hundred comments, of which over two hundred are described as essential, were sent to the Ministry of Labor, Social Affairs and Family in the course of interdepartmental review of the legislation related to the reform of taxes and payroll levies. Involved in the review were also representatives of OKS, a member of the governing coalition elected to parliament on the list of MOST-HID party. They filed a collective comment to the legislation, together with the Slovak Chamber of Sole Traders, the Slovak Union of Crafts, the Slovak Association of Small Enterprises and the Slovak Coalition for Cultural Diversity, seeking to preserve the tax burden for all citizens‘ groups at the level of 2010. „With our comments, we are demanding a separation of the task to simplify the tax and payroll levies system from the proposed increase in the tax burden for some groups of citizens,“ said the signatories of the collective comment. According to their requirements, for example, flat-rate deductible costs would be returned to the original level, which would mean the reintroduction of 60 percent flat rate of deductible expenditures for craftsmen and income of contract agents would not be burdened by social and health insurance contributions.
Employers also sent their critical comments to the reform drafts. The National Association of Employers (RUZ) calls for the decrease of the rate of social security contributions for employees from the proposed 19 percent to 18 percent. They believe this will reduce the levy burden of employees, reduce labor costs, and improve the business environment in Slovakia. They also call for differentiated rates of accident insurance premiums paid as part of social security contributions, or to reduce the insurance rate for next year from 0.6 percent to 0.4 percent of the tax base. They argue by the persisting high surplus in the accident insurance fund, the expenses of which amount to just 34 percent of revenue. They, however, pointed out that they do support the planned introduction of the so-called super-gross wage.
The Trade Unions Confederation opposes the proposed reform. They regard the proposals as an experiment, which turns the whole Slovak population into a group of experimental rabbits. „On them, the current government wants to test the functioning of a model of hidden increase of the tax burden and a simultaneous destruction of basic social security of citizens,“ the unions maintain. They consider abolishing the obligation for employers to participate in the financing of social security and health insurance of their employees immoral and antisocial. „By transferring the entire social insurance on employees, the compulsory system of social insurance loses its public character and becomes compulsory private insurance, which should have completely different legal attributes than public social insurance,“ unions say.
The General Prosecution Office has also joined the criticism of the draft reform bills. Introducing the super gross wage from 2012 would, according to the General Prosecution Office, cause direct administrative costs to the state as well as excessively high costs for the employers. The authority considers it inappropriate to burden the employers with such an extensive bill at a time when the private sector still struggles with consequences of financial crisis. Introducing the obligatory annual reconciliation of paid social insurance premiums would also cause additional costs,“ they wrote.
“The provision canceling the possibility to reduce the income tax base by insurance contributions also seems to be improper,” the authority stated, explaining that economic theory considers insurance levies to be a form of direct taxes and thus the discussed provision would demand the employee to pay tax from a tax. “They would pay taxes from incomes which are in fact no incomes but insurance levies,” the authority warns. Curbing the tax-free income threshold from 19.2 to 18-fold of subsistence level even worsens the negative impacts of higher taxation.
Based on the draft, which the Cabinet adopted in mid-May, the calculation base for taxes and payroll levies will be a super gross wage as of next year, i.e. the current total labor costs [wage + part of employee’s social and health insurance contributions paid by the employer – SITA note]. The reform is also to introduce a single health and single social security payment, as well as a uniform calculation base for payment of taxes and health and social security contributions. The health insurance contribution is to be 9 percent of the calculation base with the exception of persons with disabilities, who will pay a half of the rate. The rate for paying social security contributions for employees is to represent 19 percent, for self-employed tradesmen 13 percent, and for contract agents 10 percent. Flat-rate expenditures of 40 percent of income that the self-employed can deduct from their tax base should be replaced by a cap of approximately EUR 200 a month, which is the minimum subsistence level. The coalition agreed on a gradual reduction of the payroll levy burden of employees by a total of 4 percentage points over four years.
The assessment base for self-employed individuals for payments of payroll levies should increase, whereas in determining the base, they would cease to apply by the current coefficient of 2 for social security contributions and 2.14 for health insurance contributions. They would also not be able to deduct from their tax base paid payroll contributions (social and health insurance). The minimum assessment base for payroll contributions for self-employed individuals would be 3.3-times the subsistence minimum, thereby at lowest monthly contributions to social and health insurance should be reduced from 160.47 euro to 137.67 euro. The maximum assessment base for health and social security contributions is to be replaced by a new variable „maximum premium.“ For 2012, the maximum annual social insurance contribution should be 8,965.42 euros and health insurance contributions 4,246.77 euros.
SITA
