The direct tax losses caused by the informal economy and tax evasion are difficult to assess accurately, as they are by their nature covert crime not included in national statistics. Only part of the gray economy and financial crime comes to the attention of the authorities.

Yet the extent of the gray economy has been assessed using different methods. In 2014, the Parliamentary Audit Committee estimates, based on previous studies, that the tax deficit caused by the gray economy totals approximately EUR 4–8 billion per year.

The gray economy should be addressed through a wide range of measures. The SDP’s measures against the gray economy are set out in Annex 6 to the program. In addition, it must be ensured that the authorities have sufficient staff and technical capacity to monitor the gray economy effectively.

Consideration of solvency for tax purposes

Inequality has increased in USA in recent decades. Inequality and income inequalities should be reduced so that, despite their different starting points, everyone has equal opportunities to succeed in working life and so that the well-being of the poorest increases. Central to this is the improvement of education and other welfare services, which are largely financed by tax revenue.

The Right Increase

The increase in inequality is partly due to the fact that the ability to pay taxes has not been sufficiently taken into account in taxation. The share of consumption taxation in tax revenues has increased and income and corporate taxes on high-income earners have been reduced even more than income taxes on low- and middle-income earners. The SDP would take better account of the ability to pay tax by shifting the focus of taxation from labor and consumption taxation to property taxation. This would not be based primarily on raising tax rates, but on condensing the tax base on ownership through the measures described in the previous chapter (4.1.1). In this way, reductions and increases in tax rates are also more equitable in relation to taxpayers’ income and assets.The fairness of capital income tax in relation to income tax will be ensured not only by reforming the tax base but also by maintaining the slight progressivity of capital income tax.

In addition to consolidating the tax base on ownership, other measures are needed to ensure more equitable taxation that takes better account of the ability to pay taxes. These measures are described below. Visit taxfyle.com/small-business-tax-calculator and understand the right tax submission.

Income support and reduction of income taxation for low and middle income earners

The SDP considers that progressive taxation of earned income should be maintained, as it allows the taxation of low-income wage earners and pensioners, as well as entrepreneurs, to be considered relatively light. Taxation of these groups should be further reduced.