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Progressive taxation could cause brain drain

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The government did not listen to appeals made by companies dealing with information and communication technologies and innovations and announced that from 1 January 2019 there will be a progressive taxation of 18% for the income of individuals with a monthly personal income over 90,000 denars. According to managers of the companies from this sector, the introduction of the progressive taxation will reduce productivity, increase unemployment and the gray economy and lead to a ‘brain drain’ from the country.

The same is true of employees.

Aleksandar Galovski, an engineer at NetCetera, one of the oldest companies in Macedonia in the information and communication technology sector, says that the progressive tax will further contribute to the outflow of young qualified developers and software designers in countries with more favorable tax conditions.

“Due to the poor economic environment, young people from this sector have left the country so far, and those who are here are looking for a way to leave, everyday. Although they earn higher salaries than employees in most of the other sectors, these people do not belong to the rich citizenry, as claimed in the introduction of this tax reform, but have enough money for a normal life,” says Galovski.

Even at the initial announcement of introducing progressive taxation, the American Chamber of Commerce in Macedonia, Macedonia 2025 and the Economic Chamber of Information and Communication Technologies – MASIT, reacted to the Ministry of Finance, which includes over 200 companies.

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