Wednesday , August 10 2022

Where are the gold tax changes now?


The proposal for tax changes prepared by the Ministry of Finance is at a public hearing. Compared to the basic proposal announced earlier this year, the ministry dropped further relief for the performance prize.

The main purpose of the proposal is above all the release of income from employment or work. But, with the withdrawal of relief for bonuses, the proposed changes have become a cosmetic correction of the burden, while, on the other hand, the burden of capital gains and the taxation of corporate profits is increasing.

Tax changes include an already established regress, a change in income tax and relief, an increase in corporation tax, a minimal corporate income tax, and an increase in capital distribution.

Continuous changes in the taxation of investment income show that the state does not have a proper attitude to long-term savings.

Absolutely non-taxable recourse

The greatest effect on relieving work has a total relief of recall that has already been accepted. Reversal has already been released from contributions prior to the change if it paid up to 70 percent of the average salary. By the end of last year he raised the income tax base. With the amendments adopted, the regressions are entirely allocated to the level of the latest published average salary in Slovenia. Thus the individual is paid in a net amount.

It is expected that the break in regression will bring about 90 million euros from the budget, which was calculated at the Ministry of Finance in the spring. The breakdown of recourse is most noticeable in terms of the weight of people's income.

A similar effect on relieving employment income would be further relief from the Business Results Award that fell into the water. In the spring, the Ministry of Finance proposed that the tax-free portion be increased to 150 percent of the average salary for the previous year. The performance reward is exempt from the income tax, but the employer's and employee's social contributions are paid. Since the ministry has waived the benefits, the 13th salary tax remains unchanged. The company can pay employees an annual performance bonus up to the average salary. Such payment is not considered as the basis of income tax, but social contributions are paid.

The main purpose of the proposal is above all the release of income from employment or work. Photo by Leon Visic

The main problem with the Slovenian business reward system is that the Slovenian awards are limited by Slovenia's average salary, while internationally accepted practice abroad is that rewards and related tax relief depend on the person's salary. Therefore, in Austria the payment of the 13th and 14th person is subject to less taxes. The Austrian decision is more appropriate for two reasons. Firstly, as the employer can individually reward an individual according to his effect in the company, and second, because the distribution of awards in Austria encourages employers to increase their basic salary. With lower salaries in Austria, bonus bonuses and other bonuses are more limited.

Revision of the income tax scale

Tax changes include an already established regress, a change in income tax and relief, an increase in corporation tax, a minimal corporate income tax, and an increase in capital distribution. Photo by Reuters

The major part of the tax changes is the renewal of the income tax scale and the increase in general tax relief. Slovenia has a 4% income tax rate. The first class, up to 8500 euros from the base, is taxed 16 percent and remains unchanged, but the ceiling has moved from the current 8021.34 euros. Taxation of income from € 8500 to € 25,000 (the upper limit of the class is increased by € 800) is reduced by a percentage point to 26 percent. Also, a percentage point, up to 32 percent, reduces income taxation between € 25,000 and € 50,000 (the upper limit of the class is increased by 2,000 euros). To alleviate the burden, an increase in the total tax relief should be added to € 3,500, while the upper limit is also set for the additional general tax relief. This limit was raised to ensure that the minimum wage tax is not affected (which is significantly increasing in the coming year).

Wage cuts are a step in the right direction, but the tax burden on labor costs for unjustified Slovenian salaries will still be higher than for our Austrian neighbors, for example. Austria is also preparing to ease salaries for 2021. The fall of the government is not certain whether the tax changes Austria is preparing for a while will also be fully implemented.
The burden of higher salaries, that is, of professional staff, remains problematic. Austria, for example, has a social limit, so there is very little change in payload for larger amounts. Naturally, the structure of paid taxes is changing. The share of personal income tax is increasing, while the share of contributions decreases. Since Slovenia does not have a social cap, the burden of work on higher salaries is growing.

Higher corporate income tax

The Treasury proposes to raise the corporate income tax from the current 19 to 20 percent in 2020. This means that the state will cover part of the loss due to the reduced workload.

Although the one percent increase does not change the substantial competitiveness of the business environment, it is disturbing that the Ministry of Finance or the Ministry of Economy did not analyze the reasons why the business environment in Slovenia is inconvenient before the change. Another problem is that Slovenia increases corporate taxation at a time when developed countries are cutting these taxes. US corporate tax has fallen from 35 to 21 percent. Austria plans to reduce corporate tax by 20 percent. Germany is also considering a reduction in corporate tax on corporate profits. Slovenia does not have an appropriate fiscal strategy, and capital taxation is often the subject of political interests, and the subsequent uncertainty affects both relatively modest investments and lower economic value added.

The Ministry of Finance also introduces a new change in the taxation of capital gains. Photo by Leon Visic

Higher taxation of capital income

The Ministry of Finance also introduces a new change in the taxation of capital gains. This will be the eighth change in tax rates and the method of taxation of capital gains. Capital income will remain exempt from personal income tax but interest, dividend and other capital gains tax increases from 25 to 27.5 percent.

The minimum tax rate, as proposed by the Treasury, which is now in public debate, stands at seven per cent.

The Ministry of Finance increases the basic rate of capital gains (gains on securities and equity interests) from the current 25% to 27.5%. At the same time, it increases the profits generated over a longer period of ownership by 5 percentage points. After five years of ownership, profits are expected to be taxed 20% (now the tax rate is 15%), ten by 15% and 15 years of ownership by 10%. Capital gains generated by a holding over 20 years remain exempt.

Apart from the constant changes that bring confusion among investors, the new change may also be unconstitutional. The change can be challenged by investors who already have investments. While it is true that the tax liability arises on the sale of a security, it will be different from what is expected at the time of the purchase. In any case, continued changes in the taxation of investment income show that the state has no appropriate attitude to long-term savings.

In addition, the proposed change also increases the differences between the different types of taxes. Therefore, this means that people with a higher volume of assets have a greater interest in taxing revenue.

Smaller savers, small shareholders and owners of individual real estate will be affected by the changes. The measure is also being contested, as Slovenia has many unfavorable demographic trends that would encourage different forms of rescuing people. However, due to the changes, they will be less manageable for savings, on the one hand, as tax payments have a significant impact on their investment decisions and on the other hand they will be less reluctant to save. On the one hand, this presents problems in the field of pension and social protection and, on the other hand, this significantly reduces the investment capacity of the economy, which has even more limited resources. Because of the constant change, the charging of capital gains over a long period of time is quite chaotic.

Restriction on the application of tax incentives

Marian Sharh's party list has already announced in the pre-election period the introduction of a minimum tax on companies' profits (incomes). The minimum tax rate, as proposed by the Treasury, is seven percent.

Minimum taxation does not exclude most of the economy but will also not have a significant impact on business decisions of companies. With the introduction of a minimum tax rate, the ministry is targeting companies that reduce tax burden (excessive) through tax incentives. In this respect, it is only to be noted that the change is misleading. Indeed, the measure targets those who invest, invest in research and development, hire people with disabilities … Although it is of paramount importance, the contradictory message given by this measure is the Ministry of Finance. But some economic giants who pay little or no profit tax will not feel the change. In particular, international companies create tax-free profits and their tax base is modest or even negative.

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