The electrical substation of the Slovak Electricity Transmission System in Stupava, western Slovakia. (source: TASR)
Slovakia’s government will collect more on taxes and levies in the coming years as prices and salaries grow faster, the Finance Ministry’s latest tax forecast shows.
However, rising prices will also impact the country’s spending in 2023. The government will have to increase retirement pensions and sickness benefits, which make up about a quarter of total expenses. Inflation will also affect other government expenditures that are not part of the latest tax forecast, like the salaries of public administration employees.
How much they will earn will depend on the budget negotiations.
The medium-term forecast of both income and expenses for the 2021-2025 period was evaluated as realistic by Slovak banks in late June.
Exceptional year for firms
The approved package of measures worth €1.1 billion, which is said to support families, is projected to support the growth of taxes on consumption and partly taxes related to the labour market thanks to the higher economic activity of low-income groups.
Corporate tax revenue for 2021 is not yet complete for deferred tax returns, but it already appears to have been an exceptional year for businesses, the ministry said. Preliminary information indicates a year-on-year tax increase of 19 percent.
Pandemic declines in some sectors are gradually turning into profits, including industry and hospitality. The financial sector also experienced a record year after a weak 2020. The stronger than expected tax revenue is probably a consequence of stronger growth sales and slower cost growth, according to the forecast. This was true for 2021, while in 2022 the situation is more the opposite. It is therefore questionable, the ministry said, whether the corporate tax will remain at such high values in 2022.
In 2023 and 2024, the country’s recovery plan is expected to positively impact the revenue from corporate tax.
More money from gambling
As for VAT revenue in 2022, it exceeded the ministry’s expectations from March, when the previous prognosis was published, by €301 million and registered more than 15-percent year-on-year growth. High VAT revenues are currently the outcome of surging food, fuel and energy prices.
The state should also obtain more money from the sale of emission allowances and gambling, especially online casinos, this year.
Conversely, the state projects receiving less money from dividends of the companies owned by the state.
