Naslov
Changes in the income tax system during the economic crisis of 2010/2014
(Changes in the income tax during the economic crisis of 2010/2014)

Autori
Reiner, Ivan

Vrsta, podvrsta i kategorija rada
Sažeci sa skupova, kratko priopćenje, ostalo

Izvornik
Proceedings of International Academic Conferences / - Rim : International Institute of Social and Economic Sciences, 2015

Skup
15th International Academic Conference

Mjesto i datum
Rim, Italija, 14-17. 04.2015

Vrsta sudjelovanja
Ostalo

Vrsta recenzije
Podatak o recenziji nije dostupan

Ključne riječi
Personal income tax, tax burden, economic crisis

Sažetak
Changes in the income tax system during the economic crisis 2010/2004 Modern Croatian tax legal system was formed after gaining independence in the 1990 and the transition to an open and market free economy system, and is in a continuous process of creation . Tax legal system is influenced by many factors and, since 2010, by the current economic crisis and at the same time harmonization of legal system of the Republic of Croatia with the EU acquis in the process of becoming a full member of the same organization. Income tax was first introduced in the Republic of Croatia in the 1994 (again thoroughly amended in 2004) as a synthetic form of income tax, or, as a sum of all income that a natural person - payer of income tax gains in the tax period (which, the tax period in Croatia is equal with calendar year). This income tax is equivalent in taxation of natural persons to that which is newly introduced corporate tax for legal entities. I have mentioned that the development of the tax system is part of the harmonization of the Croatian legal system with the EU acquis, but it only partially applies to the income tax. The process of harmonization is, for the EU legal system, primarily focused on indirect taxes (such as VAT), and in that area has achieved outstanding results. In contrast, direct taxes, especially income tax has only began to coordinate the entire system through the (later we will mention them) secondary EU law (mainly directives) in terms of taxation applicable to interests from savings of individuals and mutual communication of public and private entities of the Member States. It is stated in accordance with the degree of harmonization of other form of direct tax, corporate income tax, whose harmonization is mainly kept on the prevention of double taxation and the opposite, the avoidance of double non- taxation. The income tax had been introduced, and until recently existed in its original form with four rate system and articulated progression. This kind of progression achieves progressive effect of taxation (and retains the social component of the non-taxable income known as the basic standard of living and various exemptions and deductions in the calculation and payment of the final tax liability). That reduces the regressive effect of VAT and thus harmonizes the entire tax legal system. It is also important to say that the progression in taxation is in the accordance with the Croatian Constitution, which states that everyone shall participate in the defrayment of public expenses in accordance with his or hers economic power, and lays down the principle of the welfare state among its fundamental values ​​that are also the instructions for the legislator and politicians in the creation of laws and legal system in general. At the beginning of the global economic crisis in 2008 in the Republic of Croatia there had been only small corrections in the income tax system in the form of an increase of the threshold from 1600 to 1800 HRK. The reason for such a mild reaction was that the Republic of Croatia did not, at first, felt the crisis in its full impact, as it lived in a kind of resistance to global economic trends. In 2008 the global economic crisis has affected the Republic of Croatia, which was beginning to feel vibrations in the economy and a number of irregularities, and its inhabitants decreased in their living standard. As a first response to the crisis, temporary proportional tax was introduced (supplement to existing income tax) of 4%. It has received some fiscal effects but, politically observed, was the wrong move, and it was in the public compared with the Ottoman levy from the Middle Ages. At the initiative of the President of the Republic (which belonged to opposition political block) several tens of thousands of citizens filed a complaint to the Constitutional Court for review of constitutionality of the tax measures. Although the constitutional court has never declared it unconstitutional, this form of tax was repealed in 2010 and that brings us to the first significant correction in income tax In 2010, the system was changed from four to three rate system, from the system of 15%, 25%, 35%, 40% in the system of 12%, 25%, 40% .and altered (necessarily for technical reasons) border entry in certain tax brackets. This caused slight decrease in total tax paid, which, combined with the repealed mentioned tax of 4% and reducing the number of employees led to negative fiscal effects and decrease of revenues in the state budget. In 2012 there was once again a change in the income tax system. Non-taxable income has been increased to 2200 HRK. The representatives of political power proclaimed this a social measure in terms of assistance to taxpayers who were increasingly feeling the economic crisis. But, at the same time they have changed the thresholds for entries in certain tax brackets so that there has been just the opposite effect - the final tax burden has increased. It was the first in a series of neo-liberal economic measures of government that is proclaimed as social democratic. Although the non-taxable income increased ultimately, taxpayers were paying more tax. It was only in 2013 that corrections in the marginal rates necessary to enter into individual tax brackets slightly reduced tax liability and the amount of the final tax was deducted. We must also note that in the taxation of income, certain changes occurred not only in terms of tax rates and tax brackets but, in terms of taxation of goods and taxable activities. As for taxation of self-employed, there was a change in the sense that some taxpayers couldn’t any more pay their tax liability in the form of a lump as they could before, but must file an annual tax application, with the exception of discretionary decisions of the tax administration. Another innovation refers to the relationship with corporate income tax. The corporate tax expense for the undistributed profits decreased from 35% to 15% due to the reinvestments and encouragement of investing in the economy, but, distributed profits become new tax good for the income taxation. Dividends and shares in the capital have become part of taxable income, so that in the case of the distribution of income the state budget remained non changed. Also, I would like to mention that as a new tax good appeared overseas pensions of residents. Partly because of the large immigrant wave in 1970s and returning to their homeland after retirement, it has a powerful impact on the economic status of many taxpayers. Finally, in accordance with the aforementioned harmonization of Croatian legislation with the EU acquis and Directive 2003/48 the taxation of interest from savings of individuals and the system of mutual communication of private banking and the public sector was introduced. Conclusion This series of legislative changes demonstrates the lack of consistent policy, and thus the lack of constant and consistent tax policy. We can see a constant search for the "right path" which should save the Republic of Croatia from the economic crisis. I think that we should conduct an exhaustive scientific research of the real causes of the economic crisis (except global ones), and stop experimenting in the taxation of those taxpayers who are most vulnerable and who in reality bear the burden of the crisis.

Izvorni jezik
Engleski

POVEZANOST RADA