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 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).
system also enables companies to shift part of their revenue to private
entities, taxed at 5 to 10 percent, avoiding 15-17 percent personal tax, or in case of a bigger company 21 percent corporate income tax.