Flat Tax, what is it
With the victory of the elections by the Center-right the flat tax returns to topicality. But what exactly is it?
There flat tax, “Flat taxation”, is opposed to the historical system of the proportional criterion of taxation. In recent years it has been attracting a lot of interest from economic operators, as well as for its possible economic convenience, also because it is often accompanied by measures of total or partial exemption from tax obligations, so the combination of the two factors generates an appeal that not only favored its appreciation, but which, on the contrary, generated a demand for expansion of the audience of possible recipients.
However, the convenience of the regimen is accompanied by a series of contraindications. The first of all is its compatibility with the proportional taxation system envisaged by ours Constitution. But immediately after comes the possible interference with the rules of fair competition between economic operators.
The cardinal principle of the flat tax is that it is not calculated on taxable income in a progressive manner, as is usually the case, but in a fixed manner. The ordinary system of taxation, inspired by article 53 of the Constitution, provides that “The tax system is informed according to progressive criteria”. The tax legislation has declined this principle with the provision that the income is subject to direct taxation (Irpef) according to the following scheme:
So, if the income of a taxpayer were 30,000 euros, ordinary taxation would be determined on the individual taxable brackets:
The proportional taxation system – reads www.agendadigitale.eu – represents a timid recognition that each human being, before paying taxes, should be able to satisfy his or her basic needs; the brackets corresponding to the lower income brackets correspond in fact to lower rates precisely to leave greater availability of money to the holders of lower incomes. The “shyness”Lies in the fact that a true social policy should consider that the production of that part of the income, probably necessary to satisfy basic needs, should be entirely exempt from taxation. This occurs, only partially, and in a discriminated way between the various categories of income, with the provision of tax deductions: for holders of employee / pension income, the no tax area is between 8,000 euros and 8,500 euros per month, while for a holder of business income / self-employment it is about 5,500 euros, in any case it is evident we realize how these deductibles are absolutely insufficient.
Flat Tax, how it works
With the flat tax the tax calculation system is much simpler, as a single rate is applied to taxable income, currently 15% and the tax is defined as a “substitute” for income taxes, regional and municipal surcharges and IRAP . The application of the flat tax is often accompanied by a flat-rate income determination system, thanks to which the determination of taxable income – instead of as the difference between actual revenues and costs relating to the exercise of the business, art or profession – is determined by applying to revenues (or fees) a variable “profitability ratio” according to the activity carried out, and the costs and expenses actually incurred are not allowed as a deduction.
This system entails that the income subject to taxation is not the one actually achieved, but the one conventionally determined. If, for example, the profitability coefficient were 40% (i.e. the flat-rate deductible costs are 60%), and if the revenues / fees were equal to 30,000 euros and the actual costs to 20,000 euros, the following comparative situation would arise: Then the option for the flat-rate regime, which is accompanied by the application of the flat tax by law, is all the more convenient when the actual costs are lower than those deductible on a flat-rate basis.
#Flat #tax #flat #tax #works