We are pleased to present the twelfth issue of 4liberty.eu Review, titled “Taxing Taxation: Labor and Capital in CEE”. This time our primary focus is the taxation of labor and capital – from the cases of Poland and the Czech Republic, to Ukraine, Bulgaria, and Bosnia and Herzegovina.
Paying taxes does not need to (and should not!) be taxing. Quite the contrary – it must be clear, straightforward, effortless, and taxpayer-friendly. What every taxation system needs is thus sensible policymakers who would look at the state expenditures and think of the ways of improving the exiting system and tax collection mechanisms.
Taxation is an involuntary payment levied on various entities in order to finance the state budget1. Clearly, the tax burden is heavily influenced by the philosophy of the role of the state in the public life, as well as quantity and quality of public services rendered.
The final effect of the carbon tax is determined by the way in which additional resources are handled. Every tax results in reallocation of scarce resources for purposes less desired by consumers. Not only do taxes diminish the utility of a consumer, but they also have a negative impact on economic growth.
Sectoral tax, i.e. higher taxation, which affects only selected sectors of the economy (such as banking, insurance, energy, telecommunications, or the information technology segment) is considered to be an effective tool for increasing state budget revenues.
Currently, the Czech Republic does not have a separate capital gains tax for individuals or for corporations; capital gains are included in PIT and CIT. There are also a few cases in which capital gains are exempt, mainly pertaining to property.
During the late 1990s and most part of the 2000s, CEE countries reformed their tax systems with two key characteristics: reducing the relative burden of direct taxes and – probably more distinctly, at least for the rest of the developed economies – introduction of single personal income tax rates.
The fiscal burden of labor in the Federation of Bosnia and Herzegovina is one of the largest in Europe. Although living among the poorest countries on the continent, workers in Bosnia and Herzegovina pay a lot to a high tax wedge, which is over 40%.
The majority of people around the world complain about taxes they have to pay. However, in the case of Poland, it is not only the size of the tax burden that poses a problem, but also complicated and unclear rules in place.