BRATISLAVA, August 5, (WEBNOVINY) — The Trade Unions Confederation (KOZ) gravely opposes the proposed revision of the law on income from gainful activity that is to implement the tax and levy reform. “The draft bill on the so-called super-gross wage amends 110 laws in form unprecedented in the legislative process and I am convinced that even its authors have not calculated its impacts either,“ said KOZ Vice President Vladimir Mojs. He also emphasized that Minister of Labor and Social Affairs Jozef Mihal wants to rerun the social insurance reform via this draft piece of legislation after seven years. “The fact that he has managed to incorporate such an extensive and substantial change to the entire social security scheme in the law with a completely different specialization and name proves that submitters of the legislation do not wish that experts or general public deal with the suggested changes,” underscored Mojs.
According to Mojs, super-gross wage is supposed to be a tool for what he calls an experiment with an unprecedented mega-reform of the social system called the payroll levy bonus. Mojs says this is a “useless and fancy experiment of the state with its citizens and a demonstration of enforcing exclusive interests of the capital at the expense of regular citizens”. He emphasized that the super-gross wage will change employees merely to accounting cost items for their employer, intended to increase the employer’s profits. Mojs also said that employee’s net income will stay the same, although the gross income will optically rise. “This will create space for slowing the increase of employees’ wages, mostly in the private sector,” claims KOZ vice-chairman.
Based on the draft, which the Cabinet adopted in mid-May, the calculation base for taxes and payroll levies will be a super gross wage as of next year, i.e. the current total labor costs [wage + part of employee’s social and health insurance contributions paid by the employer – SITA note]. The reform is also to introduce a single health and single social security payment, as well as a uniform calculation base for payment of taxes and health and social security contributions. The health insurance contribution is to be 9 percent of the calculation base with the exception of persons with disabilities, who will pay a half of the rate. The rate for paying social security contributions for employees is to represent 19 percent, for self-employed tradesmen 13 percent, and for contract agents 10 percent. Flat-rate expenditures of 40 percent of income that the self-employed can deduct from their tax base should be replaced by a cap of approximately EUR 200 a month, which is the minimum subsistence level. The coalition agreed on a gradual reduction of the payroll levy burden of employees by a total of 4 percentage points over four years.
The assessment base for self-employed individuals for payments of payroll levies should increase, whereas in determining the base, they would cease to apply by the current coefficient of 2 for social security contributions and 2.14 for health insurance contributions. They would also not be able to deduct from their tax base paid payroll contributions (social and health insurance). The minimum assessment base for payroll contributions for self-employed individuals would be 3.3-times the subsistence minimum, thereby at lowest monthly contributions to social and health insurance should be reduced from 160.47 euro to 137.67 euro. The maximum assessment base for health and social security contributions is to be replaced by a new variable „maximum premium.“ For 2012, the maximum annual social insurance contribution should be 8,965.42 euros and health insurance contributions 4,246.77 euros.
Part of the draft is also an amendment to the law on social insurance which should introduce changes to the first pension pillar. From 2016 the retirement age is to be automatically revised depending on the development of the average medium life expectancy in the retirement age. Calculation of granted pensions is also to be amended. A new quantity depended on the dynamics of the year-on-year change to the retirement age is also to be used in the currently effective formula for calculation of the pension value that determines the amount of pensions. One of the measures that are intended to be implemented as of 2016 is weakening of the principle of merit in the first pension pillar, which would affect people whose incomes exceeded the average wage in Slovakia. Pensions of these people are to be gradually increasingly reduced in the long term. This should apply to pensions that are to be claimed after December 31, 2015.
The Cabinet Office, National Union of Employers (RUZ) and the Institute for Research of Labor and Family asked the Labor Ministry to drop the provisions on increasing the pension age, changing the system of calculating pensions or weakening the principle of merit from the draft. According to the Cabinet Office, the main intention of the draft was to introduce the super-gross wage. “With the existing dimension of problems with introducing the super-gross wage, it is not appropriate to combine these with factual problems in social insurance which need a more extensive public debate,” is the reason they gave. However, the Ministry of Labor, Social Affairs and Family did not accept these remarks.
SITA