People often equate all amounts they pay to state and municipal authorities with taxes. Although a significant portion of public obligations are collected by the National Revenue Agency (NRA), they are quite different in nature, and it is important to distinguish between them.

 

Social Insurance Contributions

Social insurance contributions are due only for income from work. Unlike taxes, they have a “ceiling” – the maximum insurable income above which they are no longer due. At the same time, they are targeted and their amount is tied to what a person receives in return. The amount of contributions to the state social insurance (SSI), for example, which is managed by the National Social Security Institute (NSSI), determines the compensation that would be received in the event of unemployment, temporary incapacity for work due to general illness and maternity, as well as the amount of the pension from the first pillar of the pension system.

Social insurance contributions also include those for supplementary compulsory pension insurance (SMPI) (the second pillar of the pension system). Although these are collected ex officio by the state, they do not go to the state budget, but to the individual accounts of insured persons in private pension funds. Therefore, it is important to emphasize that not all deductions from the gross salary go to the state.

Unlike social, health insurance contributions are due even when a person is not working. They are also targeted - they provide access to the state healthcare system, managed through the National Health Insurance Fund (NHIF). Even if you are not insured, you will be provided with emergency assistance if necessary, without the need for payment. However, this applies only to life-threatening conditions. For all other cases, including receiving emergency assistance, you must have paid your health insurance premiums.

More information about social and health insurance contributions could be found in article "Social Insurance. Pension Fund".

 

Fees

Fees are due when budget organisations provide you with a specific service – for example, issuing an identity document, a report or a certificate. A fee is also paid for using the republican road network – a vignette or toll fees. Unlike taxes, with fees you receive something specific in return, which can be clearly and easily linked to the costs incurred for its provision – for example, maintaining the road infrastructure. If you do not drive outside your locality, you do not use the highways and therefore do not contribute to their construction and maintenance. However, it is not easy to determine whether and how much you drive in your locality, which is why you pay road tax if you own a vehicle.

Along with the real estate tax, you also pay a municipal waste fee. It is also mistakenly perceived as a tax, but in fact, in return for it, you receive a specific service – collection, transportation and processing (disposal) of garbage. With fees, both central and local authorities strive to tie the amount collected to the costs of providing it. For this reason, different approaches have been proposed based on the principle that “the polluter pays”. To implement this principle, it is possible, for example, to open containers only with a card and measure the weight of the waste. An alternative is to collect only in special bags, where the volume is decisive, etc. Similar practices are successfully applied in other countries.

A similar principle of tying costs to the amount collected is also used in toll fees. With vignette fees, it does not matter how many kilometres are travelled on the national network within the fixed period. However, this is not fair because the same amount is paid by a person who has travelled 500 km and by one who has travelled 50,000 km. At the same time, the latter has depreciated the roads to a greater extent. This problem is solved by toll fees, as here the amount due is directly linked to the distance travelled. However, they apply only to highways, since their construction and maintenance is the most expensive.

Traditionally, various types of fees are applied at a local level, including those for dog ownership, the use of pavements, squares, roadways, and others.

 

Fines

Fines are not imposed to generate revenue for state and municipal authorities. On the one hand, their purpose is prevention – to discourage violation of the rules introduced by the various provisions in laws and regulations. On the other hand, they sanction violators in order to correct their behaviour.

The imposition of fines is carried out through penal decrees issued on the basis of acts establishing administrative violations. These decrees are subject to appeal in accordance with the procedure provided for in the relevant law, and the authority that imposed the sanction must prove the guilt of the offender. For the reasons indicated, fines differ significantly from taxes and Social insurance contributions. The statute of limitations is shorter and is determined in accordance with the Administrative Violations and Sanctions Act, and not in accordance with the Tax and Social insurance Procedure Code (TSPC). At the same time, no interest is due in their case, but on the contrary – there is often an incentive for their timely payment, which is a certain percentage discount on the amount due.

 

If necessary, check the relevance of the amount of various types of payments to the state in the relevant regulatory documents.

 

Useful links:

National Revenue Agency

National Social Security Institute

National Health Insurance Fund

Administrative Violations and Sanctions Act

Tax and Social Insurance Procedure Code