The tax system has so far survived despite the pre-election rhetoric of the Smer party. The flat tax principle was not changed, there are no special taxes for pre-selected firms, and the VAT was only reduced on a very select category of goods. The Finance Ministry is now continuing with its sensible approach. It plans no VAT reductions for next year, nor the introduction of a gift tax, even though the government programme considers both possibilities.
The reason is simple. Thanks to reforms, the economy is growing so fast that it is bringing the government enough money, and it is also allowing it to close the gaps in public finances in keeping with European rules.
For two years before the introduction of the euro, the budget must be kept under strict control. Any change could bring unexpected results. And the current tax system is far from high and dry. The government has still not had to face any major problems in public finances, while the euro entry is keeping its policies responsible. But what will happen after January 1, 2009? A year and a half before elections, politicians will be tempted to please their voters. They will also have to explain their record on the fulfilment of pre-election promises. In this atmosphere, the government will be under pressure to act irresponsibly. Add to this unresolved hospital debt, the promise to compensate the clients of pyramid schemes, and pressure for a wider VAT reduction.
The European Union is not the real threat to the Slovak tax system, and empty shouts about 'tax sovereignty' serve only to conceal the fact that the fate of the tax reform will be decided in the Slovak parliament.
Pravda, April 16
23. Apr 2007 at 0:00 | Juraj Porubský