BRATISLAVA, August 20, (WEBNOVINY) – Prepared changes in income taxation and the payment of compulsory social and health contributions can have a negative impact on the Slovak economic growth, according to analysts. „If proposed changes are not compensated in other areas, which regarding the need to consolidate public finances deficit, would not make much sense, the impact on economic growth will be negative,“ the VUB analyst Martin Lenko told SITA. Increased number of tax evasion cases and illegal workers can be another negative side to the cancellation of exemptions in contributions and taxes, according to Lenko.
Regarding the penetrative need to consolidate the public finances deficit, many unpopular steps are necessary, according to Lenko; however, he personally prefers measures designed to reduce spending and saving. Analyst from Volksbank Slovensko, Vladimir Vano, also admits the negative effect of “experimentation” with direct taxes on the business environment. „In fiscal consolidation in general, greater emphasis on the revenue side is put on indirect taxes, not only due to their weight in the budget revenues, but also because the experiment with direct taxation can negatively affect the competitiveness of Slovak firms and entrepreneurs,“ Vano warns.
This week, a trio of ministries, namely the Finance, Labor, and Health Ministries, published a proposal of measures which should help to recover broken public finances and improve the tax-contribution system, according to Finance Minister Ivan Miklos. Therefore, the entrepreneurs can expect the unification and reduction of flat expenditures to a unified 30 percent from the beginning of next year, for example. The Finance Ministry also wants to limit the application of the non-taxable portion of the tax base only to the so-called active income, or to cancel a non-taxable portion of the tax base for the specific savings, life insurance, and supplementary pension savings. According to new rules, the income received from the sales of an apartment, residential house, or other real estate, will be taxed as well. However, this concerns only real estate acquired after the efficiency of the amendment to Income Tax Law.
The changes will affect the contributions as well. Expenses of self-employed people for social and health insurance contributions will not reduce the calculation base for the premiums in the future period as of next year. Presently, the paid insurance premiums by self-employed persons are included in expenses upon the calculation of health insurance premiums (paid health insurance) and social security insurance (paid health and social security premiums). Therefore, the health and social contribution of sole traders will increase due to the new rules. Some of the proposed changes do not have to be definitive yet, center-right coalition parties will try to find specific solutions on next week’s Cabinet session.
SITA