NGOs given one-year tax reprieve

THE SLOVAK parliament has approved a revision to the Income Tax Act that grants certain NGOs one more year of eligibility to receive donations from individual and corporate taxpayers.

THE SLOVAK parliament has approved a revision to the Income Tax Act that grants certain NGOs one more year of eligibility to receive donations from individual and corporate taxpayers.

In what the NGO sector described as a "cosmetic change", the Slovak parliament on January 31 decided that taxpayers would continue to be allowed to assign two percent of their income tax payable to any NGO they choose. Under the Income Tax Act amendment that came into effect on January 1, the range of NGOs eligible to receive the donations was restricted.

However, when taxes for 2007 are paid in March 2008, the earlier restrictions on donor NGOs will take effect. As of that date, individual and corporate taxpayers will be able to assign two percent of their paid income taxes only to NGOs active in preventive health care, social welfare, culture, the treatment and rehabilitation of drug addicts, the promotion of youth sports, and support for handicapped people.

The revision thus cuts out a whole range of NGOs dealing with human rights, the environment, and various civil society issues, from receiving the tax assignments. The NGO sector expects to lose hundreds of millions of crowns due to the changes.

Many suspect that the tax changes are a form of political revenge by the Fico government on the third sector, which has never been supportive of any of the current ruling parties, and which in 1998 was instrumental in securing an 84 percent turnout in general elections that unseated the authoritarian Mečiar administration.

Today, Vladimír Mečiar is back in power along with his Movement for a Democratic Slovakia (HZDS) party.

The HZDS has never made a secret of its antipathy for the NGO sector, and the Pravda daily recently quoted HZDS MP Jozef Halecký as saying that the tax donations should be withheld from "those NGOs who used education, research or other forms of camouflage to get involved in politics and have a major influence the results of elections in 1998".

In the lead-up to September 1998 elections, Slovak NGOs mounted a massive campaign called OK '98 to encourage people to turn out to vote. The campaign addressed mainly young people, whose election participation in the end tipped the scales against the ruling HZDS, which had dominated the Slovak political scene for nearly a decade. Pro-democratic parties united under the Slovak Democratic Coalition (SDK) gained power after the elections as the HZDS was unable to form another government.

Norbert Brázda of the NGO information portal agreed that "[preventing] human rights and environmental NGOs from receiving the two percent tax donation is politically motivated.

"This is an effort to limit those organizations that regularly warn people of undemocratic practices and law violations by those in power at the national and municipal levels," Brázda told The Slovak Spectator.

"The authors of the changes did not provide any reasonable explanation for singling out human rights and environmental groups [and dropping them from the list of approved tax recipients]."

In defense of the planned changes, Finance Minister Ján Počiatek argued that "over the past four years, the value of these donations have risen tenfold to over Sk1 billion in 2006. A rise this steep invites corruption and the ineffective use of resources.

"We are not out to destroy the third sector... but we are convinced that it is not necessary to pump so much money into it," Počiatek argued.

New rules are also in place to prevent individuals from assigning two percent of their paid taxes to NGOs unless the total donated is over Sk100 (3 euros). Previously, the minimum sum was Sk20. Corporate entities will now have to donate at least Sk250, and face a new ceiling on donations of Sk1 million.

The NGOs say the changes are not only malicious but also counterproductive, since charitable organizations often provide services that the state does not or cannot handle effectively.

Martin Bútora, president of the Institute for Public Affairs think-tank, said that dropping environmental groups from the list of recipients would hurt the environment and lower the quality of life in Slovakia.

"This country has inherited serious problems in the area of ecology," he said.

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