Text file: 4790.txt
author: peter i
downvotes: 24
end consideration date: 2013-07-17
id: '4790'
number comments: 17
number views: 3042
proposal type: Competent authority response
response: "Response from the Ministry of Finance\nThe proposal relates to the income\
  \ tax burden on farms and to the future regime for the taxation of immovable property.\
  \ By way of introduction, we would like to explain that a modern and well-established\
  \ tax system in most countries is generally composed of three forms of tax: income\
  \ or profit tax, sales tax and property tax. This spreads the tax liability over\
  \ different types of tax base and ensures that all forms of activity or taxable\
  \ status contribute a share of the tax revenue.  Taxes are a general revenue of\
  \ national or municipal budgets, intended to provide public goods (education, security,\
  \ construction of public infrastructure, culture, environmental protection, etc.)\
  \ which are made available to all citizens on equal terms.\nIn particular, the petitioner\
  \ first submits that the taxation of farm incomes is too high and that any additional\
  \ taxation would mean their destruction. In this connection, it should be pointed\
  \ out that today farm income from agricultural and forestry activities is, in principle,\
  \ assessed on a flat-rate basis via the cadastral income. This is laid down in the\
  \ rules on cadastral income, which assess cadastral income as the potential annual\
  \ market income, taking into account the data held in the land register for agricultural\
  \ and forestry land (types of use and productive capacity - rating points), statistics\
  \ on average production by type of land use and an estimate of average costs based\
  \ on the calculations of the agricultural advisory service. The cadastral income\
  \ is therefore an estimate of the average income that could be realised on agricultural\
  \ and forestry land in Slovenia. As a flat-rate basis for determining income or\
  \ the tax base for income tax on income from agricultural and forestry activities\
  \ for which no accounting is required (the Income Tax Act refers to such activities\
  \ as 'basic agricultural and basic forestry activities'), the cadastral income is\
  \ attributed to the users of agricultural and forestry land and, through it, the\
  \ income from these activities is taxed.\nWe agree with the proponent that cadastral\
  \ income is unrealistic. It is primarily an average level of income, which may,\
  \ of course, be too high for specific farms, but may also be too low. As a general\
  \ rule, a flat-rate estimate of average income is usually too high for small, non-specialised\
  \ and non-market farms, and for larger, market-oriented farms it is usually too\
  \ low.  It is therefore not appropriate to apply such a solution to all types of\
  \ taxable persons. The cadastral income is a flat-rate method of income assessment\
  \ which is appropriate for small-scale activities for which the determination of\
  \ income on the basis of accounting records would indeed represent a disproportionate\
  \ administrative burden. In any event, the main method of determining income should\
  \ also be the same for market-oriented agricultural activities as for all other\
  \ activities, i.e. on the basis of factual evidence. Therefore, in 2014 and 2015,\
  \ larger farms (with a flat-rate income of more than EUR 7 500) were subject to\
  \ the obligation to establish their income on the basis of bookkeeping, but this\
  \ was abolished as from 2016. Under the current rules, all farms, regardless of\
  \ size, are once again required to have their income for income tax purposes (as\
  \ well as other public levies, obligations and entitlements) determined on the basis\
  \ of cadastral income.\nIt should be further clarified that, based on the 2013 interest-based\
  \ calculations, which overestimated costs and in some cases underestimated income,\
  \ the cadastral income is significantly underestimated in relation to the real level\
  \ of the average income from agricultural and forestry activities in Slovenia, and\
  \ amounts to only around 20% of the income actually earned by farms in Slovenia.\
  \ It is therefore not possible to agree with the proposer that the cadastral income\
  \ is too burdensome, and in particular that it is not too burdensome for larger\
  \ farms. Today, for example, the cadastral income per hectare of arable land (although\
  \ this varies from region to region and depending on the quality of the land) ranges\
  \ from EUR 40 to around EUR 100. This amount is, of course, the tax base that counts\
  \ towards the annual tax base, which means that on a hectare of arable land with,\
  \ say, a cadastral income of \u20AC70 (which is the estimated income for a good\
  \ quality arable field), at the average effective income tax rate, the income tax\
  \ (i.e. income tax) would be around \u20AC15 per year. In addition, the Income Tax\
  \ Act excludes from income tax assessment all farms whose flat-rate estimated income\
  \ per year is less than \u20AC200. Under this solution, all small subsistence farms,\
  \ especially those not claiming subsidies, are excluded from this taxation.\nThe\
  \ main tax principles are fairness and equity, which in the case of income tax means\
  \ equal treatment of taxpayers in a comparable situation. In the light of the above,\
  \ it can be noted that farms today generally do not report real income and therefore\
  \ on average contribute much less to the liability than other taxpayers with similar\
  \ incomes. Of course, for some farms, the level of cadastral income currently set\
  \ may also be too high. Under the income tax rules, each farm may voluntarily choose\
  \ to determine its income on the basis of bookkeeping. In such a case, it has the\
  \ option to report actual income, but it can also report actual expenses and, if\
  \ these exceed income, it can also report a loss. In such a case, no income tax\
  \ is payable at all.\nThe current arrangements for the taxation of personal income\
  \ from farming and forestry activities are therefore set up in such a way as to\
  \ give this activity additional advantages which other activities do not enjoy.\
  \ It is therefore not possible to agree with the proposer's view (which, interestingly,\
  \ is shared by more than half of the responses) that the taxation of agricultural\
  \ and forestry activities is already too burdensome.\nNor can the proposer's argument\
  \ that the introduction of a property tax would result in farms paying double property\
  \ tax be accepted.\nIncome tax on cadastral income is not a property tax but an\
  \ income tax. In the case of income tax, the taxable amount is the income and the\
  \ taxable person is the person who earns the income. In the case of cadastral income\
  \ tax, the person who actually uses the land, and not the owner, is therefore the\
  \ taxable person.\nProperty tax is essentially a tax on property. The taxable person\
  \ is usually the owner and the taxable amount is the value (not the income) of the\
  \ property. In Slovenia, the property tax will replace other forms of property taxation\
  \ (namely the property tax under the Law on Citizens' Taxes, the compensation for\
  \ the use of building land (under the Law on Building Land and the Law on Construction\
  \ of Buildings, and the fee for the maintenance of forest roads under the Law on\
  \ Forests). Today, farms already pay part of these taxes, and of the land, forest\
  \ land is already burdened today. There are no agreed starting points for the future\
  \ tax, which, as mentioned, will replace the current levies, but this tax should\
  \ also be based on the principle of equal treatment and should in principle include\
  \ all immovable property, including all types of land. The tax will be a revenue\
  \ for municipalities and is therefore intended to provide public services (in the\
  \ broadest sense of the word), which in principle benefit all immovable property.\
  \ However, it is already an agreed starting point that the tax burden on immovable\
  \ property should not exceed the current level of taxation or, for newly taxed immovable\
  \ property, the level of the tax burden should not exceed the economically sustainable\
  \ limit.\nIt is essential for all types of taxes that they are determined according\
  \ to the economic strength of the taxable person or the object of taxation and equally\
  \ for all taxable persons in a comparable situation. Farms and farmers cannot and\
  \ should not be exempted from this, as all citizens of Slovenia are equally responsible\
  \ for their country and we all have to contribute to its functioning (for the public\
  \ good) according to our means. In any case, taxpayers who are not able to meet\
  \ their tax obligations even in this way have the possibility to exercise the right\
  \ to a deferral, an instalment payment or even a write-off of their obligations.\n\
  In all this, the petitioner's disrespectful attitude towards other professions,\
  \ the urban environment and the State cannot be ignored. All work, whether it is\
  \ work with the hands, on the land or in a factory, or mental work, the results\
  \ of which cannot be easily measured in kilograms and litres, is important and,\
  \ including through the tax system, contributes to the well-being of all citizens.\
  \ That is why taxation, whether of income, turnover or property, must ensure fundamental\
  \ fairness, which should be upheld by all citizens.     \n "
response date: 2015-12-29
response due date: null
sent date: 2013-06-18
title: Lower tax for farms
upvotes: 28
url: https://predlagam.vladi.si/predlog/4790
