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DEPUTY CHAIRMAN OF STRONGEST PARTY DISCUSSES PLANS FOR TAX AND ECONOMIC POLICY

Smer: Next government must be acceptable abroad

ROBERT Kaliňák, the No 2 on the candidates list of the opposition social-democratic Smer and the party's vice-chairman, is not what one might imagine a socialist politician in a former communist country to be - young, modern and savvy, with current or former roles in almost a dozen companies.

Robert Kaliňák of Smer.
photo: ČTK

ROBERT Kaliňák, the No 2 on the candidates list of the opposition social-democratic Smer and the party's vice-chairman, is not what one might imagine a socialist politician in a former communist country to be - young, modern and savvy, with current or former roles in almost a dozen companies.

With parliamentary elections on the doorstep, many political observers are asking whether Smer itself is all that meets the eye. The Slovak Spectator spoke with Kaliňák on June 6 about his party's background and its intentions should it form part of the next government.

The Slovak Spectator (TSS): Smer has been talking for a while about raising taxes for people who earn more than a million crowns a year, but last weekend you started talking about a cut-off of Sk600,000 (€15,863) a year. Which will it be if you get into government?

Robert Kaliňák (RK): First of all, I have to say that the government, along with all the other negatives that affected the lives of Slovak citizens, encouraged in people a strong sense of individualism, if not selfishness. Our programme tries to revive the principle of solidarity, which means that people who have above-standard incomes should contribute more to society, to the joint coffers, with a higher tax rate. Not all people have equal opportunities and abilities to earn money. But we in no way want to discourage people from working, as the right wing claims.

Everyone remembers times when we paid 40 percent tax, and we really don't want to go in that direction. We have proposed increasing the tax ceiling for individuals from 19 to 25 percent, but it hasn't been decided yet. We considered starting the increase with annual incomes exceeding Sk1 million, but maybe it would be more effective to increase the tax rate starting at Sk600,000. It all depends on how [political] negotiations go, because it's clear that we won't be able to form a government on our own.


TSS: The view of right-wing critics is that by changing your income targets for the proposed tax increase, you are betraying the fact that your tax policy has more of a populist than a professional footing.

RK: Certainly, the right wing has to defend itself and its policies. This comes as no surprise to us, as we have been bombarded by such arguments over the past four years. We simply want to bring more solidarity into the life of the country. The form and the content of this solidarity will of course depend on our coalition partners. We can communicate our tax intentions, and this is what we are doing, but the situation after elections might be different, and our coalition partners might set limits on the numbers that we are now communicating. Basically, we are directing the tax increase at full-time employees with annual incomes of over Sk600,000, because these are people who cannot cheat on their income tax forms, since their employers fill out the forms for them.

On the other hand, we have said that we would keep the 19-percent tax for corporate and legal entities, and if it is proven that this tax rate improves tax collection, we would be willing to discuss further options. So as far as the business environment is concerned, we don't want to make changes there.


TSS: Despite the fact that Smer is a social democratic party, it is a home to many people with strong business backgrounds. Could this fact affect the tax policies you pursue after elections? Is there any current of opinion in Smer that realizes the flat tax was a great publicity gimmick for Slovakia abroad, and that it would be foolish to scrap it?

RK: Look, I don't think foreign investors care at all whether there is a flat tax in Slovakia or not. Investors come to Slovakia as corporations or legal entities. It matters very little to them whether individuals enjoy a flat tax or not. The tax rate is what is important for them, and in this sense Slovakia is competitive because it offers 19 percent.

What really attracts foreign investors here is the cheap labour. If we continue to claim that KIA, for example, came to Slovakia because of the flat tax, how it is possible that Hyundai went to the Czech Republic, where there is no flat tax?

Let's be honest, it's always more about whether the tax rate is competitive - and the Czech Republic also has low taxes - than about whether there is a unified flat tax. I can understand that our flat tax fascinates some countries like the US, which sees it as a great challenge, but Slovakia has never had such a wide variety of tax rates as a huge country like the US.


TSS: Even if investors don't care about the flat tax, they are very interested in Slovakia's payroll tax burden, and Smer plans to tax dividends.

RK:I think that within the European Union, Slovakia is the only country that does not tax dividends. We are basically talking here about re-installing a European standard, and we will certainly discuss this option with our future coalition partners, since it is part of our election programme.

As far as payroll taxes are concerned, this is a very complicated issue based on complex calculations of payments to health funds and the pension system. I really think that right now there is very limited room for cutting payroll taxes. Nevertheless, the [new] government should certainly deal with this issue, because high payroll taxes complicate the creation of new jobs.


TSS: Again, some Smer politicians are saying behind closed doors that the last thing the party wants to do is scare investors away. How will Smer balance its leftist policies with the aim of keeping Slovakia an investment-friendly destination?

RK: Again, these is a favorite argument of right-wing parties. I would again go back to the Czech Republic, where over the past eight years, even though a leftist government has been in power, the increase in FDI was much higher than in Slovakia.

While Slovakia is at the top of the list of countries endangered by poverty, the Czech Republic is ranked high as a country that is not endangered by poverty. How is it possible that two neighbouring countries that used to be one country are now at different ends of Europe? This is what the rightist government did to this country.

We in no way want to endanger investments, we simply want to work for our citizens. The state is simply a collection of tools that are supposed to be used for the benefit of citizens.


TSS: One of the most frequent criticisms of Smer is that your party lacks both expert members as well as an expert academic or NGO community, such as that which surrounds the SDKÚ, for example.

RK: I think this was due to the historical development of the SDKÚ. I think all the young journalists here that grew up in MESA 10 [an economic think tank founded by Finance Minister Ivan Mikloš - ed. note] are right-oriented. People who represent the economic community in Smer are people who have real-life experience, people who run businesses, people who had many employees and who won global tenders, of course tenders not announced by this government.

Look at our candidates list. It includes people who could amaze even Mr Mikloš. We do have economic experts, even though they were not given much space in the media. I believe they will lead Smer much better than the current rightist government.


TSS: But you haven't mentioned any names. Who would you put up beside SDKÚ politicians like [Labour Minister Iveta] Radičová, Mikloš or [Foreign Minister Eduard] Kukan, people who had respect in their fields as professionals before they became politicians?

RK: Well, nobody considered Mikloš an expert until he became minister. Who knew about Kukan before he became foreign minister? Radičová was the only one who was known as a sociologist before. Along with our chairman, Robert Fico, I would mention Palo Paška, who is an expert and who made life difficult for [Health Minister Rudolf] Zajac. Many of his proposals wound up being included in regulations and legislation.

Then we have Dušan Čaplovič who is a top expert in education. He served as deputy chairman of the Slovak Academy of Sciences for many years. Do you have a feeling that these people lack expertise? Mr Mikloš' claims are really ridiculous.


TSS: Smer is said to be backed by people who participated in and privatised property under the 1994-1998 government led by Vladimír Mečiar, such as [former VÚB state bank chief Ján] Gabriel, [Trnava-area businessman Vladimír] Poór, [former SLSP state bank chief Ivan] Kiňo, and [Mečiar campaign director Fedor] Flašík. Certainly, the number of people on Smer's candidates list who did business with these people in the past, as was documented recently in an article by Marek Vagovič in the Týždeň magazine, suggest that Smer's policies after the elections might be influenced by these Mečiar-era entrepreneurs, and that's a worry for the international community.

RK: Mr Vagovič's article, and I told him this personally, is a great piece of nonsense. People on the Smer candidates list operated in the business environment. Slovakia is not the US. It is a small country where many business affairs get linked together. I at times represented the government of [Jozef] Moravčík in 1994, and nobody talks about this government negatively today. Many were linked to companies owned by current rightist or liberally-oriented politicians. Slovakia is not a huge country where you can live in isolation.

These hints of a connection based on the fact that someone served with someone else on a board of directors are really ridiculous. If someone mentions Gabriel and Kiňo, these are people who voted with Dzurinda for three years in parliament. This seems to me like a children's fairy tale, it's not even worth commenting on. I understand that the SDKÚ is disappointed because it could never ever reach the success of the Czech ODS, and can only dream of 35 percent, because the way it does politics is a catastrophe.


TSS: But if it was just a case of Slovakia's being a small country where everything is linked, then presumably Smer's candidates would have just as many links with other business groups. But they don't - links to former HZDS members or supporters is virtually the only thing many of them have in common, besides the fact they are members of Smer.

RK:You're talking as if we didn't have 150 people on the list but 70. Who exactly do you have in mind?


TSS: Demovič, Majzlan, Čech...

RK: Demovič is a doctor.


TSS: He may be, but he also served for the last four years on Flašík's Pezinok basketball club, along with Čech.

RK: So he's a basketball sports therapist. What kind of connection is that? I was involved with Markíza [TV station through its www.markiza.sk website - ed. note] some time ago [2000-2001], but no one mentions that. It depends what kind of connections you're looking for. This is just another attempt to discredit Smer, and I don't feel like talking about it any more.


TSS: What is the likelihood of a government being formed between Smer, Mečiar's HZDS party and the far-right Slovak National Party?

RK: We said long ago, before all of this speculation started, that we were not going to discuss possible developments after June 17. The voters will decide what the next government will be. The only statement we have made is that Smer will not be a part of any government that is not internationally accepted, and I think that's a pretty clear statement that you can deduce all kinds of things from.

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