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Question: hi has there been any new estimates or official comments on the cost and details of the potential change affecting households' taxation next week? thank you
Answers: Hello, we are very far from any evaluation of the still uncertain changes in the income taxation. the baseline scenario remains that limited if any changes will be implemented as of January 2018, given the short time and the current state of discussions. Possibly the social security contributions would be unified (employee and employer) and tax payers might have to fill some wealth statements. These are the most realistic ideas of the many circulated so far. political promises of cutting the income tax rate from 16% to 10% were voiced recently (last week) -- but they were not confirmed yet by government and will probably be deferred amid rising budget deficit accumulated in the second part of the year. the government's plans for taxation in general and for income taxation in particular have changed frequently during 2017. The initial plans for "household income taxation" was abandoned and replaced with "global income taxation". Global taxation of course makes no sense in the context of the flat tax rate -- but the government said that it would extend deductibility for certain expenses, and this explains everything. At the same time, ruling coalition's head Liviu Dragnea mentioned a wealth statement for each individual -- while technically difficult, this reminds rather of politicians' frustration with filling such statements on an annual basis. Technically, it looks like the government aims at cutting tax evasion by these statements -- but, again, in an indirect way that bypasses the normal way of addressing tax evasion. The discussion about income taxation was recently obscured by other fiscal innovation planned: Split VAT. There is no draft for such plans, though [as it was no draft for the opther plansL housheold taxation, or corporate income taxation -- another idea abandoned by the government]. At this moment, in the area of income taxation, the government wants to (legally) move the social security and healthcare contributions to employee [while technically the payments would be processed by employers]. The impact should be neutral on both side: employer and employee. But legally this might be difficult to be enforced in the private sector, tax experts warned. While we believe this might not be that difficult to be enforced (such public statements, including by tax experts, tend to be politi8cally biased), we see little gains and a lot of technical complications from this innovation. But it is not impossible (as it was in the case of household taxation, or corporate income tax - -two obviously impossible models that have been still discussed seriously by both government and tax experts). Employers would have to increase the gross wage with what now is "total labour cost" by including their contributions to social scurity and healthcare systems. All in all, the net wage and the socials security contributions should remain the same. Notably, in the public sector: the promised 25% gross wage hike as of January 2018 strangely matches the increase from the gross wage top total labour cost [some speculated that in fact the government actually wants to have the two offsetting with neutral impact on the public wage payroll -- whichis already rising too much after repated wage hikes.] finally: there is a general view that the authorities are trying to reverse the post-election spending exuberance [that came on the top of last year's pre-election exuberance]. In fact, it looks more like the government's more rational views prevailing over the political rhetoric generated by the majority leader Dragnea. It remains unclear whether there is a genuine conflict between the two views, or is a continuous bargaining.Show Full Answer More from Ask the Analyst