Final Word from Friday, June 10, 2005

Small businesspeople operating as sole proprietors often complain about getting the short end of the stick, but two recent decisions could improve their position. The Supreme Administrative Court ruled that employers can legitimately decrease costly payroll taxes by concluding outsourcing agreements with independent contractors. It's up to the two parties to decide what kind of contract they have, the Court ruled. The decision went against the government's efforts to eliminate payroll-tax avoidance, but it's the government itself that wants to raise the flat expense write-off for sole proprietors from the current 25-30% to 50%. Taken together, these two things would make it very attractive to hire certain professions (esp. those with low expense structures) on a non-employment basis. There would be abuse, but in general it would bring greater flexibility to the labor market. [Czech Republic živnostenský list writeoff social-security tax]


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