PRINCIPLE OF FAIRNESS IN REGARD TO PERSONAL INCOME TAX

Any tax that achieves the desired and anticipated economic impact may be considered fair. Croatian positive tax system is justified by the Constitution which states that everyone must participate in the settlement of public expenses in accordance with their capabilities. Accordingly, the tax system is based on the principles of fairness and equality, therefore taxation should be the least property limitation. Tax on personal income is the instrument of tax policy that with its inevitable fiscal objective has a much more important objective of a social naturealleviate regressivity of VAT. Most financial scholars, lawyers or economists, agree that the principle of fairness is tried to be put into practice just by applying progressive tax rates on income. In some counties of Eastern Europe though, a flat personal income tax system has been introduced, also in order to increase the level of fairness. Th us this paper analyses personal income tax system, by focusing on the different types of income, tax base, tax rates and tax credits. The other issue of taxation that is scrutinized is the formation of an optimal tax burden, which means a continuous balance searching. This procedure and the related arguments are presented in this paper.