Later this year, financial staff will have their first opportunity to test the effectiveness of a new strategy to encourage electronic transactions: the introduction of tax deductions for those who pay by card. The fully “targeted” measure was tested in 2022 for the first time in practice, when consumers had to answer the following dilemma: pay by card and receive a deduction from next year’s income tax (the one that would normally have to be paid with their 2023 application) or “negotiate with a professional about the best price “here and now””. No impressive results are expected. In addition to the fact that the professions for which the tax credit has been established are strongly opposed to not issuing a receipt, there is always a quantitative element: for the vast majority of consumers, the tax credit is much less than the potential benefit that it could bring. to provide – for example – a “gift” of VAT. Thus, the motivation of the taxpayer remains primarily moral: to join the fight against tax evasion and the fair redistribution of the tax burden.

For the vast majority, the tax deduction on cards is much less than the “charisma” of VAT.

What specialties are included in the list of discounts? Veterinarian, plumber, refrigeration and heating maintenance, electrician, hairdresser, barber, beauty salons, massage services and dance schools, babysitting services, etc. How does the discount actually work from the beginning of 2022? From the value of income related to the above specialties, 30% of taxable income is deducted and with a maximum limit of 5,000 euros. Theoretically, you can win up to 2200 euros. But for whom? For a minimum that will make electronic payments of more than 16,000 euros to selected professional groups and declare an annual income of more than 40,000 euros. They are few. Most people in the country, even if they pay by card for a hairdresser, dance school, ice cream, etc., will get very little benefit. A taxpayer who pays 150 euros for a cooler with a card will save 45 euros from his taxable income. If it is 10,000 euros, he will have a tax deduction of… 4 euros. If his income is 20,000 euros, he will have a tax deduction of 9.9 euros, and if the income reaches 30,000 euros, he will earn 12.6 euros. Even at €50,000, when the tax benefit is highest (because the highest tax rate also applies at that income level), the tax deduction for the €150 transaction would be €19.8. And what if the cooler suggests… to cut VAT in order not to issue a receipt? Then the price will automatically drop from 150 euros to 121 euros. Profit is clearly higher for both the taxpayer and the specialist limiting income tax.

The logic of tax incentives has stepped up this year in other areas as well. Like in the real estate energy retrofit, for example – with the difference that only labor is deducted, not materials, which also drastically limits interest, while recently a very … generous provision for green investment was adopted, which doubles the amount of expenses. This is the only field where the result can be. Professionals, in addition to the tax incentive, also reduce their taxable income by issuing a document, so the financial benefit is significant. This is also the reason why a radical proposal to tax all citizens – employees, pensioners, self-employed – based on their income and expenses has been under consideration for many years. This will mean a possible loss of income from income tax, but a huge benefit from VAT, which is also a big “wound” of the tax system, despite the increase of the last 2-3 years.