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Tax Hikes Possible Only with Cuts or Cancellation of Some Deductions
Thursday 22 July 2010 Zoom in | Print page
Bratislava, July 22 (TASR) - According to the new Government, whether or not taxes will be raised depends on changes in the deduction system.
"We'll maintain the flat income tax and won't raise it (from its current 19 percent). Any prospective raise in income tax can take place only with the cancellation or decreasing of some deductions," according to the working draft of the Manifesto.
Moreover, Prime Minister Iveta Radicova's Cabinet is making plans to carry out an audit of tax exemptions in order to reduce them, and it wants to re-harmonise VAT {varied rates were introduced for certain medicaments and educational materials during the Smer-led administration that ended last month).
According to economists, any potential decrease or cancellation should only be applied to healthcare levies. "That makes sense, as the contemporary healthcare levies are not really an insurance but a tax. And no matter how much one pays, everyone gets the same healthcare treatment," Slovenska Sporitelna bank analyst Michal Musak told TASR.
VUB bank analyst Zdenko Stefanides told TASR that there should be a system whereby a person who contributes more to the system be able to expect more out of the system. "Because of this, I can envision the healthcare levies replaced by a healthcare tax," Stefanides said.
The economists think that the harmonisation of VAT would be a good step towards simplifying the tax system and administration. "Last but not least, harmonised VAT collection would alleviate the pressure exerted by many groups to have their products or services reclassified into a lower VAT category. It would also take away the risk of companies creatively passing some sort of product as a different product only to pay a lower tax," said Musak.
"To what extent the increase in VAT will translate into higher consumer prices depends on competition and the character of the market," explained Stefanides. "It will be different with vendors on regulated pharmaceuticals market and different with farmer selling products from his own farmstead."
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