A group of opposition members of parliament, Julius Brocka from the Christian-Democratic Movement (KDH), Ivan Farkas from the Hungarian Coalition Party (SMK) and Ivan Miklos from the Slovak Democratic and Christian Union-Democratic Party (SDKU-DS), submitted a draft bill to parliament on Monday that proposes reducing the tax rate for personal and corporate income tax from the current 19 percent to 17 percent.
According to the draft, the allocation of tax revenues form personal income tax as part of fiscal decentralization would also change. Towns and villages would get 75 percent over the present 70.3 percent and counties would get 25 percent instead of present 23.5 percent from proceeds of this tax. This would be a compensation of the negative effect caused by proposed reduction of personal income tax rate on budgets of towns, villages and counties, the opposition reasons. According to the draft bill, all personal income tax revenues should thus go to the municipalities' budgets. Although the proposed bill would have a negative impact on the state budget in the short run, due to reduction of the revenues collected for the state and municipalities' budgets, it would eventually result in increased income tax revenues in the medium run, by increasing the tax base as a result of higher employment rate, influx of direct foreign investments, increase of wages, higher profit, and consumption.
The opposition's draft bill would have a positive impact on the financial situation of all citizens and businesses, as the reduced tax rate would increase workers' net incomes as well as their standard of living. For corporate entities, this would create larger space for reinvestment of their profit. It should also affect positively the employment rate. Improvement of Slovakia's competitiveness in the field of attracting direct foreign investments would result in further economic growth and thus creating new jobs. The opposition believes this would result in higher employment rate.
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