This year‘s Tax freedom day fell on June 1st according to analysis of the F. A. Hayek Foundation and Slovak Taxpayers Association.
While last year Tax Freedom Day fell on June 1st, this year Slovaks will work for the state a little longer. It is caused by a slight increase in economic redistribution by the government. Compared to last year, Slovak citizens will celebrate tax freedom about half an hour later. The main reason is a gradual slowdown of the growth of the Slovak economy and government consolidation measures in the public finances.
Tax Freedom Day represents the day on which the average citizen has earned enough income to pay his annual tax burden. Thus, if the overall tax burden represents 50 %, citizens work first half of the year for the state and second half for themselves and their families.
According to the F. A. Hayek Foundation, total redistribution rate in Slovakia this year is 41.71% of gross domestic product. This means government redistributes nearly 42 cents of every euro generated in Slovakia. In comparison, last year redistribution rate was 41.68%.
Converted into working days, this means that until June 3rd, Slovak citizens had submitted all their earnings to the state and from about 10:30 in the morning, they already began to work for themselves and their families.
F. A. Hayek Foundation and Slovak Taxpayers Association have been calculating Tax Freedom Day in Slovakia since 1999. It represents the day citizens on avarage stop working for the government and begin working for themselves and their families. This is a simple, straightforward way to demonstrate stete‘s burden on its citizens.
The Tax Freedom Day shift, to the detriment of taxpayers, was caused by following factors:
- Slowdown of Slovakia’s economic growth
Economic redistribution is measured by the share of consolidated government expenditure on gross domestic product. This year’s slower economic growth combined with an increase in consolidated government expenditures contributed to the higher rate of redistribution and pushed Tax Freedom Day closer to the end of the year.
Calculations are based on current forecast of GDP growth published by the National Bank of Slovakia, which assumes Slovak economy will grow by 0.7% GDP.
- Government consolidation of public finances
In the long term, an objective of a balanced budget is very important. Consolidation measures on the revenue side, however, pose a risk of further damping already slowing growth of the Slovak economy. The rate of consolidated government expenditure this year will increase again even if the government manages to reduce the public deficit this year as planned.
We emphasize that compared to the past years, in which multiple warnings of our analysts were confirmed (e.g. deficit threat), we included some potential risks to public finances in calculating Tax Freedom Day in a very conservative manner. Given the high degree of uncertainty, the real Tax Freedom Day could fall on a date even more at the expense of the taxpayer than our conservative calculation shows.
Translation: Tomas Zemko