Tax breaks boost self-employment in Slovakia.

By bne IntelliNews December 17, 2010
Self-employment could be preferred to regular employment because of financial advantages, a recent analysis by the Financial Policy Institute (IFP) at the finance ministry suggests. Self-employed were more than 15% of the total workforce in the country in 2009, more than twice than in 1998. Moreover, the share of entrepreneurs that do not have employees was 77% in 2009 compared to 57% on average in the EU. The analysis points at three possible reasons for this development. Self-employed owe lower income tax and social contributions because of the reduced by 40% tax base. Employers have incentives to hire self-employed because of the less strict regulations for individual entrepreneurs compared to the employment protection legislation. Finally, a person could receive a subsidy for two years if he/she starts an entrepreneurship. Since the high share of self-employed results in lower tax revenues and social and health insurance contributions, that increases the burden on the budget, the incentives schemes should be changed in order to give greater weight on non-financial advantages, the analysis concludes. Otherwise, the report by the IFP reveals that the labour market responded to the economic crisis not only by decreasing the number of employed but also by changing the working hours. As a result, the companies could retain some of their workers.

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