ECONOMY

Tax ‘reform’ is unfair to individual taxpayers, with income brackets too wide

A taxation system is socially just and boosts growth when it is easy to manage, provides incentives for work and savings, distributes the tax burden in an equitable manner and, therefore, leads to the redistribution of wealth. In the new reforms announced for the taxation of individuals, the above principles have not been followed, for several reasons. First, the income tax brackets are too wide, which makes taxation socially unjust. The announced tax scale is too wide: There is a 10 percent difference (29 to 39 percent) in the tax rate of the two main income brackets, which appears logical, but the brackets themselves (-12,000 to -30,000 and -30,000 to -75,000) are too wide. International practice shows that there is a difference of 80 percent between the upper and lower limits of these brackets. Here, the difference reaches 150 percent. Second, the law does not provide for index-linking the income brackets to inflation. As a result, many taxpayers will find themselves in a higher income bracket due to the effects of inflation and will be forced to pay higher taxes even if their disposable income has declined in real terms. This happened before, in the period 1991-2000, when people’s real disposable incomes shrank between 2.4 and 7.5 percent but the income tax they paid increased by -200 to -2,500, depending on the case. The end result is unfortunate: in the guise of lowering the tax rates, the state, once again, indiscriminately raids the taxpayers’ pockets.