ECONOMY

Tax breaks based on fiscal space

tax-breaks-based-on-fiscal-space

The government’s agenda that its creditors will assess in the midterm fiscal plan from April includes the gradual reduction and abolition of the solidarity levy and the further decrease of the Single Property Tax (ENFIA). The government also plans to put off the corporate tax reduction from 24 to 20 percent for this year’s earnings in order to bring forward the cuts to employers’ and employees’ social security contributions.

This week’s assessment report by the European Commission says that fiscal leeway will be discussed in May, along with the cost of the planned tax breaks for 2020 that are not included in the year’s budget.

In April the government will decide on a significant reduction to the solidarity levy for 2019 incomes, with the extent and time of application depending on the course of the budget to date.

The inclusion of an extra 2,900 areas in the system of objective property values and bringing these rates used for taxation purposes more in line with market prices will lead to a 140-million-euro increase in revenues from ENFIA, the Commission’s report estimated. It added that this expansion of the tax base allows for the restructuring of the property tax rates. The government intends to implement the 8 percent average rate reduction announced as well as softening the blow for owners who will see ENFIA rise in the areas newly included in the system.

According to the blueprint to be included in the midterm fiscal plan, the securing of some fiscal space will also lead to a 2 percentage point reduction of contributions by corporations and workers for 2020 (against an original plan for 0.9 percentage points). The measure will concern 1.5 million full-time salary workers. In total, the government plans to slash contributions by 5 percentage points for full-time workers during its four-year term – i.e. by 2.38 points for companies and 2.62 points for employees.

Despite the focus on cutting contributions, a small corporate tax reduction has not been ruled out, possibly by 1 percentage point, to 23 percent.