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Personal income tax system: provisions regarding fairness and equality

Any tax that achieves the desired and anticipated economic impact may be considered fair. Croatian positive tax system is justified by the Constitution which states that everyone must participate in the settlement of public expenses in accordance with their capabilities. Accordingly, the tax system is based on the principles of fairness and equality, therefore taxation should be the least property limitation. The notion of fairness is difficult to define due to its abstract nature. Therefore it is impossible to determine the general definition of the term that has been elusive. Regarding tax law, fairness is that the tax burdens are located fairly with regard to tax capacity. The most important problem of the perception of fairness is that individuals, in most cases, do not get any direct countervalue in return to their tax payments. Tax practitioners, however, whether they are lawyers or economists, do not attach any special meaning to the concept of fairness. Tax on personal income is the instrument of tax policy that with its inevitable fiscal objective has a much more important objective of a social nature-alleviate regressivity of VAT. Most financial scholars, lawyers or economists, agree that the principle of fairness is tried to be put into practice just by applying progressive tax rates on income. This paper analyses personal income tax system in the Republic of Croatia, by focusing on principle of fairness regarding tax base, tax credits and tax rates, and also comparing that to the EU approach.

fairness; personal income tax; EU; Republic of Croatia; tax system

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