Tax payers' association calls for flat rate income tax

Tax payers' association calls for flat rate income tax Izvor: Davor Puklavec/PIXSELL, Ilustracija

The Lipa tax payers' association called on Tuesday for the tax reform announced by the government to focus on reducing the tax burden on salaries.

"If the government and the Finance Ministry decide to roll out a tax reform, its absolute priority should be reforms to the income tax regulation. Also, there is no reason not to abolish the completely unnecessary taxes on employment and work-related injuries, especially considering that the number of unemployed people and costs for work-related injuries are constantly falling," the association said in a press release.

The government and the Finance Ministry said earlier this year that changes in tax regulations would be introduced in early 2019.

The association said they supported any effort to reduce the tax burden, and added that during the four years of the group's existence they repeatedly emphasised the importance of implementing reforms that had been postponed for too long, saying that this resulted in "collateral consequences, including the massive drain of the most productive part of the labour force."

They said the measures that the government needs to introduce should aim to produce effects quickly, and added that the best way to do this would be reducing the tax burden to personal incomes.

Although some changes to tax regulations had been introduced in early 2017 which resulted in a lower tax burden, it is still higher than in similar economies in Central and Eastern Europe, which all introduced flat rate income taxes.

They said 14 countries introduced a flat rate income tax in the period from 1994 to 2012, which varied from 10 percent in Albania to 27 percent in Lithuania. The government did not record a drop in tax revenue do to this, the association added, bet illustrated by Russia, where the introduction of a single 13 percent flat rate resulted in a 26 percent increase in tax revenue.

The association added that Financial Agency's recently released data for 2017 showed that the total cost of labour rose by 8.5 percent, and the total cost of all net salaries rose by 10.4 percent.

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