Since then, however, it has repeatedly expanded in scope, allowing even large businesses to use the breaks to dramatically reduce their taxes and social payments. And far from being temporary relief, it appears to be here to stay – to the detriment of a coherent tax system, critics say, if not also to the amount of tax revenue that government collects.
The legal scheme involves employers signing contracts for services with private entrepreneurs or “SPD,” as users of the simplified tax system are known, instead of registering them officially as staff employees and paying in the general tax system.
Employers are happy with the rules because they get to avoid paying social payroll taxes, which can go from 36.76 to almost 50 percent of the salaries of official employees. By contrast, private entrepreneurs’ social taxes are fixed at slightly less than Hr 400 per month ($50).