The proposals submitted to the Government by academics, technocrats and experts for the tax reform, the first in our country after 23 years, were viewed positively by the vast majority of citizens, parties and social partners. A second reading of these proposals, however, leads to the safe conclusion that the tax transformation, as presented through the proposals of experts, is far from complete. Quite the contrary, I would say: it is very incomplete.
First of all, there can be no complete tax transformation when failure to pay income tax is a civil offence and not a criminal offence, as is the case with non-payment of VAT. Since non-payment of income tax is not a criminal offence, some can exploit this loophole. If a citizen owes the Internal Revenue Department (ED) e.g. €100,000, is brought to justice and asks for a settlement, saying that he can only pay €500 per month, what other options does the ED have?
Of course, political will is also needed to initiate criminal proceedings against well-known businessmen and legal entities who owe large sums of money to the state.
As previously reported, in a debate in the Parliament's Finance Committee it was reported that 100 well-known well-known businessmen and companies each owed one million euros in VAT. Have criminal proceedings been initiated? Were they punished? Did they pay the VAT due? On this occasion, it would be right and proper for the ICT to inform citizens whether they have actually paid the amount they owe and, if not, for their names to be made public, as was the case with sports clubs. There must be no double standards.
Payment of VAT
The second key missing point in a comprehensive tax transformation is the non-direct payment of VAT by businesses. Under current legislation, businesses have three months to pay the VAT collected from citizens to the state.
That is, a business keeps the money received from VAT and uses it for three whole months. This means that the state finances these businesses, all year round and in perpetuity and without interest. When a citizen shops in a supermarket, for example, he sees on the receipt he receives a breakdown of the amount he paid: so much money the purchases, so much from savings due to tenders and so much from paying VAT.
Therefore, when the supermarket closes its cashier in the evening, it knows how much money it has received from VAT. Why not pay them to the state the next day? Why should the state finance businesses in this way? And what if a business goes bankrupt?
Family income
The third key element that is missing is the taxation of family income instead of individual income when it comes to couples.
There are cases where some women choose not to work for some time in order to have two or three children and then re-enter the labour market. In these cases, if the spouse has an income of €30,000 per year, this family will pay income tax, in contrast to another where both spouses each have an income of €20,500, i.e. €41,000. In other words, we punish families who have children, at a time when our country is facing a big problem of low birth rates.
At the same time, bearing in mind that 48% of employees have an income of up to €19,500 per year, i.e. they are not in a tax bracket, it means that in too many couples, one employee, if not both, will not enjoy the discounts recommended by experts, such as the discount for each child and the discount for paying rent, or for the interest on a housing loan.
Therefore, the experts' assertion that the joint tax return for spouses should not be introduced in order to encourage women to enter the labour market is completely wrong.
Tax credits
The proposal for a tax credit for the payment of rent is very correct, since tenants will ask for a receipt and the owner of the property will be obliged to declare the actual amount received and therefore tax evasion in this area will be largely combated.
Tax credit, however, should also be given for all extracurricular activities of children and tutoring. Parents spend too many millions every month on specials, music, dance, martial arts, etc. Are all these amounts declared? I very much doubt it.
A tax deduction should also be given to families whose children attend private schools. According to data from the Statistical Service, each student attending a public high school costs the state about €15,000 per year. This amount is saved by the state for each student attending a private high school. At the same time, with the payment of tuition fees in private schools, jobs are created, whose salaries are paid by parents instead of the state, which has an additional financial benefit by paying income tax by private sector teachers.
* Political Scientist/Journalist
