THE RECORD tax relief which the chemical company Duslo Šaľa is requesting from the state to keep its production in Slovakia has raised criticism among the opposition as well as economic analysts. They see this state assistance not only as a non-systematic form of aid but also say it points to business connections between current Economy Minister Pavol Pavlis and tycoon and Czech Finance Minister (of Slovak origin) Andrej Babiš, who owns the company. The Pharmaceutical and Chemical Industry Association says the assistance is needed because of the current situation in the chemical market in Europe.
Duslo Šaľa is seeking a 10-year tax holiday of €58 million. If granted, this will be the highest tax relief given to a single company in the last 12 years, the Sme daily wrote. In exchange, Duslo promises to invest €300 million into building a new ammonia production plant, increasing ammonia production by 100,000 tonnes annually to 300,000, by 2017.
Earlier this year it indicated that if it did not receive the tax relief, it might move production from Duslo to the Czech Republic or Germany, citing high gas distribution prices in Slovakia. While Duslo was primarily talking only about keeping existing work places, it later indicated it would create 80 new jobs.
The relevant legislation on investments is not clear enough on whether the company has to create new jobs to get tax relief.
Based on the valid legislation, the provision of tax relief for a company investing more than €200 million is in the hands of the Economy Ministry, which, however, has to ask the European Commission for permission. The Economy Ministry has already sent the request to Brussels.
Ivan Štefanec, MEP for the Slovak Democratic and Christian Union (SDKÚ) and one of the critics of the tax relief, sent a letter to Joaquín Almunia, the EC commissioner responsible for competition, on July 17, in which he seeks information on progress reached in the inquiry into the tax relief proposed for Duslo. According to Štefanec, there is a serious conflict of interests, as current minister Pavlis has had business ties with Babiš, whose Agrofert group owns Duslo.
In response to the tax relief, the opposition Freedom and Solidarity party of Richard Sulík considers it absurd that the cabinet has no say over such big tax relief. Sulík cited the think tank INESS, another critic of the tax relief, calculating that €58 million equals corporate income taxes paid by 40,577 small companies.
“It is absolutely obvious that the state budget will miss this money,” said Sulík, as cited by the TASR newswire.
Roman Karlubík, head of Slovakia’s Pharmaceutical and Chemical Industry Association, sees Slovakia’s chemical sector as one of the hardest hit by strict EU legislation and insists the state assistance for Duslo is a good decision.
“We live in an environment in which individual EU member countries compete with each other in providing various forms of assistance to significant investors,” Karlubík told the Pravda daily. “In spite of the constantly proclaimed liberalisation of the market, there does not exist a really liberal market within the EU.”
