The government's Tax Commission is discussing the fiscal 2005 revision of the tax system. The focus this time is on the decrease or abolition of the fixed reduction for individual income and resident taxes, which was introduced in 1999 as an economic-stimulus measure. Rather than draw the line there, the commission should undertake a comprehensive revision of the income tax.
A yearly revision of the tax system is relevant, but the government should not play around with the system in response to its immediate requirements and conditions. The revision should be seen as a chance to take a step closer to a more desirable tax system. One of the main topics for discussion by the Tax Commission is the fixed tax reduction for the income tax, by which the initial tax payment calculated according to the progressive tax rate is cut by 20 percent.
The fixed tax reduction for the income tax was introduced as a temporary measure that would be removed when the economy entered the stage of recovery. The mainstream opinion in the commission is that, in view of the present economic situation, the time has come for its abolition. The commission is considering a two-phased method, by which the fixed reduction would be reduced by half next fiscal year and then abolished in fiscal 2006. We agree with this approach.
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