Finance Minister Richard Gibson expresses surprise in today’s edition that turnover tax TOT receipts dropped, while wage tax revenues were up. He finds that strange, because if companies
make less money they are obviously not going to hire more people or give them a raise.
It’s indeed a puzzling development, but there could be several logical explanations. One is that while on average the income of local businesses may have declined, market conditions still prompted an increase of personnel expenses. Some employers also are bound to do that by, for example, a collective labour agreement (CLA) or stipulations of individual contracts.
A small factor many might not take into account is that the maximum wage limit for Social and Health Insurances SZV health coverage is indexed every year. For certain employees earning just above that level this would normally entail switching from a private insurance firm to SZV.
However, as not everyone involved tends to be happy about that prospect, some companies offer to adjust their salaries accordingly. The latter means they don’t need to change anything, but automatically produce more wage tax.
On the whole though, the news does not appear to be good. Reduction of cost usually follows disappointing results and the impact of lower revenues on the labour force may yet be felt in the near future.
Of course, what also could be happening is the use of fewer illicit workers and more legal employees for whom taxes and social premiums are duly paid. That might seem like a bit of wishful thinking, but – along with overall fiscal compliance – should certainly remain a goal to be actively pursued.
