Introducing a fair tax?

Zdravko Saveski

While the majority of citizens barely make ends meet, the minority rich and ultra-rich do not know which luxury to throw away money at first. This is Macedonia today. More than half of the workers have a salary below 15,000 denars. For that paycheck, most of them grind, sweat, work overtime, on Saturdays, even Sundays. And the other ones, those who don’t know how much money they have? For them 15,000 denars per month is a low income.

The latest PRO data indicate that the highest monthly gross salary in 2016 was 227,000 euro or about 204,000 euros net. This salary is incredible 1,040 times the minimum wage of 12,000 denars. In other words, one who has a minimum wage of 12,000 denars should work 1,040 months or 87 years to receive one monthly salary of this person. And in order to earn two such  monthly salaries – theoretically he can not even live that long, let alone work! This shows how great the class differences in Macedonia are.

The rich become more and more rich, the poor are poorer. In our powerlessness, in our apathy, in the middle of the propaganda with which we are poisoned, we incline to believe that it is a kind of natural process, and not a consequence of conscious governmental policies. Reducing taxes, deregulating the economy, undermining the state’s social functions, do this and you get a clean form of capitalism and – an increase in class differences. Such policies in Macedonia have so far been most radically applied by the previous government, and its “pro-business” tax cuts policy and flat taxation have led to the share in the total income of the richest one percent of the population in just four years to double by 6, 3 percent in 2006 to 12.2 percent in 2010. According to the Ministry of Finance, now the most lucrative one percent earn 14.4 percent (one-seventh) of total income, the highest level of all European countries for which data are available.

The present government shows declarative will to change this. With a year’s delay, which allowed the rich to continue to enrich themselves under the rules introduced by the previous government, they finally came up with a legal income tax solution that they say is a progressive and fair tax. Given that only two tax rates are introduced, it is questionable how much that tax is called progressive rather than two-tier tax. But no matter how we will call it, the essential dilemma is how much this legal solution is righteous? Will this improve the material condition of the poorest? Will it prevent the trend of concentration of wealth in a small circle of ultra-rich, will it allow the redistribution of wealth to the benefit of the poor? Or will everything be reduced to swaying?

Capitalists, their chambers of commerce, the media they control, the economists who are protecting their interests, have expressed an extremely negative attitude towards the new legal solution. As if the government is introducing Scandinavian taxation. They using programmers and developers as an excuse, saying they would leave the country otherwise. Those who, by giving low salaries have forced many people to leave, are now warning of emigration! And the legal solution is so modest that, for example, it envisages that one who has a gross salary of 140,000 denars to take only 289 denars a month less than before. That is, instead of 92,733 denars as before, they’ll have 92,444 denars. Is there a difference in the living standard if instead you pay 92,444 denars a salary instead of 92,733 denars? Those 289 denars will force you to move out of the country on a monthly basis? There is a whole range of reasons for people leaving this country that is destroyed by corruption and power, but the introduction of a tax on income with such characteristics will not be among those reasons.

Capitalists and the ultra-rich have already become accustomed to the state serving them completely. So they forgot that the new government (contrary to what it claimed before the elections) allowed them to extract wealth, privileging them to continue to pay contributions on a small part of their wages, unlike the other 99 percent of the citizens who pay contributions to the entire amount of their wages. They forgot that prior to 2007 they paid not 18 percent, but 24 percent of the income above a certain amount, that by 2001 they paid 35 percent. They also forget that in no other country in Europe, except in the “propulsive economies”, Kosovo, BiH, Bulgaria and Romania can not pay such a low income tax of 10 percent for the revenues above a certain amount. Is this treasure they are piling up not enough for them? If instead of 50,000 euros, they receive 47,000 euros per month, for example, will it cause the slightest change in their standard of living? Or did everything come down to that saying: the human eye is insatiable? When are you able to pile up fortunes, pile and don’t sweat it if others are drowning in poverty?!

The reaction of the capitalists and their megaphones is expected. Their class interests require them to oppose the return of progressive tax, even in its extremely mild form. It is surprising that even people who work for peanuts also stepped in to defend the flat tax and, unfortunately, they will never have a salary over 90,000 denars. So it turned out that in a situation where solidarity at the level of society is at an extremely low level, when everyone looks after their own personal interest, the poor are the ones who fret that well-off and ultra-rich will pay additional funds in the budget.

What is this paradox due to? The first reason is deeply rooted resistance to the introduction of higher taxes, regardless of what kind of tax it is. The second reason (which is in place) is the conviction that the government abuses the budget funds it has. The third reason is the partisan opposition to everything that a particular political party does when it is in power, when there is a negative attitude towards that party. Assessing government policies from the point of view of class interest? Yes, the capitalists do it all the time, but the workers in Macedonia – rarely. And then we wonder why they lie to us so easily, why do they manage so successfully to get away with just throwing crumbs?

The current legal decision on income tax should be criticized, but not from the position of defense of the flat tax. The position to be criticized is that this legal solution is throwing dust in the eyes and that the money that will be provided will not fundamentally change the material condition of the poorest citizens. This legal solution is not introduced to reduce poverty, but to protect the rich. It will protect the rich, because in the future the government will trumpet that it has introduced a fair tax, that the rich pay more, and in the meantime they will continue to concentrate social wealth in their own hands. Kocho Angjushev is farther sighted than the other capitalists in Macedonia when he sees the benefits of his class from such a legal solution!

 

Will the poorest benefit from this tax reform? Bearing in mind that in parallel with this reform, the government has brought legislative changes that will hit the poorest, preventing retirees, welfare users, redundant workers and freelancers from selling goods on the markets in order to make ends meet, then it becomes clear that the motivation of those in power is not an improvement of the material status of the poorest, but the collection of additional funds in the budget. With these additional funds, yes, probably this government, like the previous one, will throw crumbs to the people. Not to improve their material position, but for its own advertising. In this context, the replacement of the flat tax with two-tier tax neither aims to, nor will it prevent from piling up social wealth to the richest and will not allow its redistribution in favor of the poor. Consequently, the two-tiered property tax of SDSM can not claim to be a fair tax at all.