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SMEs: legislation is chaotic

Disgruntled small businesses say the government's ad-hoc approach to corporate sector legislation is seriously demotivating the SME (small and medium-sized enterprises) sector in Slovakia.
Despite generating 58% of Slovakia's annual industrial output, small firms say they are getting short shrift from the government, as new laws are often confusing, poorly thought out, and put into practice too quickly for businesses to adapt.
Legislation in the sector has been described by SMEs as 'a nightmare', one that distracts them from their core business and consumes valuable time and money. They warn that something must be done soon to secure the health of one of the most important sectors of the economy.


MSP head Juraj Majtán is unhappy with constant law changes in the SME sector.
photo: Ján Svrček

Disgruntled small businesses say the government's ad-hoc approach to corporate sector legislation is seriously demotivating the SME (small and medium-sized enterprises) sector in Slovakia.

Despite generating 58% of Slovakia's annual industrial output, small firms say they are getting short shrift from the government, as new laws are often confusing, poorly thought out, and put into practice too quickly for businesses to adapt.

Legislation in the sector has been described by SMEs as 'a nightmare', one that distracts them from their core business and consumes valuable time and money. They warn that something must be done soon to secure the health of one of the most important sectors of the economy.

"They [the government] sometimes make several revisions to one piece of legislation, and it's hard to keep abreast of it and adjust to it. SMEs have to cope with all this because there isn't any other choice," says Juraj Majtán, general director of the Agency for Support of Small and Medium-sized Businesses (MSP).

Discontent growing

Marek Jakoby, an analyst with the MESA 10 think tank, agrees with the sentiment that permeates the sector. Jakoby says that experts have pinpointed areas that cause particular concern to SMEs and make it hard for them to do business. He says that there is often a breakdown between the theory behind some laws, and the actual practice when they come into effect.

"Businessmen are motivated to run their businesses when there are clear and logical legal measures approved, which is not the case in Slovakia, where there is no link between tax levies and accounting legislation. More comprehensive legislation should be approved to encourage SMEs to do business here and thus positively affect the country's economy," he said.


Majtán claims that the government has implemented an unsystematic approach to legislation on small firms.
photo: Ján Svrček

The problem, Majtán claims, lies in an unsystematic cabinet approach to legislation affecting the sector, and lack of a long-term policy for the sector's development. "The government doesn't look at the problems surrounding SMEs as a whole. It tends to discuss and push through one specific piece of legislation which they feel should be approved [without looking at that legislation as part of a wider whole] whether because of [a need for] approximation of Slovak legislation with that of the EU countries or for other reasons. Problems have to be solved step by step, not haphazardly," he said.

SMEs themselves are equally unhappy and are calling for closer communication with state officials. "We have to deal with a lot of unnecessary paper work. Laws change four times a year. It happens quite often that a piece of legislation is approved and later on revised. There should be more interaction for the sake of feedback between the government and the sector while creating the legislation, as in other countries," said Vladimír Polák, director of the Kovena trading company based in the western Slovak town of Pezinok.

However, government representatives have said that several positive measures had been implemented to improve the health of SMEs in the country over the last two years.

Deputy Prime Minister for Economy Ivan Mikloš, in an interview with The Slovak Spectator on February 6, said that conditions for the sector's growth had improved considerably although he admitted that the environment was still not ideal.

"I understand that the situation is still not perfect, but interest rates and income tax have decreased, the Bankruptcy Law has been revised, the [new SME] licence scheme has been approved, and domestic demand is expected to grow this year, something that is important for SMEs. This will all definitely boost their [SMEs'] performance," he said.

The EU influence

While people such as Majtán have criticised the government's legislation on SMEs for sometimes being hastily implemented in a rush to harmonise with EU directives, representatives of EU states in Slovakia have said their countries' SME sector has been through the same, often painful, process, and emerged relatively unscathed.

Anton Van Beek, the head of the Dutch chamber of commerce in Slovakia, explained that SMEs' account for 99% of total enterprises in the Netherlands. "Since they are of such tremendous importance for the country, a lot of support programmes have been designed for them and they have strong lobby groups influencing relevant legislation.

"But one should remember that in Slovakia legislation has to be changed because of the EU, and adjustment to the EU environment. This has to happen at specific times, and it might be that some people have complaints because the changes significantly affect them. In the Netherlands, we have the EU legislation already approved, for the greater part, but a large number of entrepreneurs are still complaining because it's still too much [administrative work] for them," Van Beek said.

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