Capital income and earned income are different in nature, so their different tax treatment can be considered justified. At present, the taxation of the highest capital income is in some cases clearly lighter than the taxation of earned income, which the SDP would address, inter alia, by consolidating the tax base.
The Right Situations
In many situations, income from business activities is based directly on work in an employment relationship. The aim of the SDP is for sole proprietors in such a position to be on a more equal footing with employees in terms of taxation and social security. The number of sole proprietors has increased, for example, with the platform economy, where previously paid tasks are performed as an assignment.
As a result, sole proprietors in a weak position in the labor market are facing an increasing share of risks and administrative burdens. The reform of low-income income support and social security should ensure equal treatment and proper safety nets for sole proprietors. In this way, they would also be in a better position to negotiate remuneration commensurate with the nature of the work. The s corp tax calculator is important there.
The ability to pay taxes should be taken into account by being flexible in the payment period
Progressive income taxation, capital income taxation and corporate taxation are based on the taxation of net income, so they take good account of the ability to pay taxes. However, the ability to pay taxes may also be temporarily temporary. Solvency problems may relate, for example, to the financing of investments or to property taxes levied before the proceeds are realized. Such problems should be resolved by deferring payment of tax as necessary, as has been done in inheritance and gift taxation. The deferral could be extended to situations where the tax would be disproportionate to the payee’s ability to pay and the nature of the inheritance. In these situations, for example, the inherited property could act as security for the tax, in which case the tax would be paid on the next transfer.
- The deferral option should be extended to other types of taxes, such as property taxes. The ability to pay taxes should be ensured primarily through progressive taxation and flexibility in the payment period for taxation. Tax cuts narrow the tax base and can hamper economic growth. Therefore, needs-based tax reductions are only appropriate in exceptional situations where the tax payment would be manifestly unreasonable even in the longer term. Solutions to tax and other debts that are detrimental to long-term employment and well-being will be sought primarily through reform of recovery and enforcement legislation.
Reduction of consumption taxation
Tax increases on consumption and production should be avoided as a matter of priority, as they increase inequality and weaken the purchasing power of the lowest income earners the most. For example, VAT on heavy incomes could be reduced if the economic situation allows. As a first step, the VAT threshold could be raised moderately, thus removing the relief associated with the threshold. At the same time, this would reduce the administrative burden for small businesses and the Tax Administration.