ECONOMY

Back to old tax-raising method

The dire need for further revenue has obliged the government to essentially reintroduce the «imputed income» system of taxation for corporations and professionals. The «imputed income» system, introduced, and scrapped, by the previous Socialist government, imposed a ceiling of acceptable earnings on enterprises according to the sector they belonged to and the size of the premises they occupied. Tax revenues increased significantly under the system, which, for all its flaws, cracked down on the underreporting of earnings which had reached outrageous extremes. A preliminary look at this year’s income filings by small and medium-sized enterprises shows that they reported a reduction in earnings averaging 20 percent and they have also shown inflated expenses. This has led officials at the Economy and Finance Ministry to suspect widespread tax evasion. It also appears that, for all the inspections on companies, it is difficult to catch tax dodgers. Not wanting to reintroduce the old system in its totality – thus admitting defeat – ministry officials are looking for ways to introduce some objective criteria, such as the number of employees per company, in order to arrive at a minimum acceptable income. Officials also confirmed that all pending tax cases from the years 1999-2002 will be settled by the companies declaring at least part of the income they are suspected of hiding. This measure was announced a week ago, then withdrawn, only to surface again, a sign of the government’s unwillingness to renege on its pre-election promises not to «harass» businesses in the way it alleged its predecessor had done.