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ECONOMIC BRIEFS

Corporate tax cut by parliament from 40% to 29%

The Slovak parliament on November 24 approved a new law on corporate tax, cutting the tax rate to 29% from 40%. The proposal was approved by 85 votes from 118 deputies present, a majority in the 150-seat parliament. It changed the original government draft, which had suggested the tax be reduced only to 30%.

In her reaction to the vote, Finance Minister Brigita Schmögnerová said the bigger tax decrease (than proposed by the cabinet) would only pose a slight risk to the state budget.

"We estimate that this decrease (in the tax rate) will reduce budget revenues by about 600 million crowns ($14.3 million)," Schmögnerová told journalists. She added that this revenue shortfall was not significant in view of overall budget revenues of around 200 billion crowns.

She had said earlier that a cut to 30% from 40%, as proposed by the government, would result in a revenue shortfall of some 6.4 billion crowns.

The parliament is expected to vote on the 2000 state budget proposal, with a deficit of 18 billion crowns or around two percent of gross domestic product, in the middle of next month.

The government's proposal of a 30% tax was a compromise, which had resulted from a dispute between the finance minister and some other economic ministers in the coalition cabinet. While Schmögnerová proposed a new corporate tax of 35%, Deputy Prime Minister for Economy Ivan Mikloš saw the preferred range as between 20 and 25%, saying that higher rates than this would hurt Slovakia's regional competitiveness.

On November 23, the parliament approved increases in taxes on fuel, beer, alcohol and cigarettes. These have been aimed to compensate for the scrapping of earlier plans for a motor vehicle tax.

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