A NEW requirement that every citizen and permanent resident of Slovakia submit a property declaration to the tax office was cancelled January 28, with cabinet sending a hastily amended bill to parliament for approval.
If the altered bill is passed, only those people who acquired property worth over Sk1.5 million ($30,600) between September 1999 and December 31, 2000, or who own more than Sk1.5 million worth of non-real estate assets in Slovakia or abroad, will have to report these assets to the tax office. The offending law had required even those who did not have such property to fill out a form declaring this to the authorities.
The amended bill also prolongs the deadline for submission of property reports from the end of January to the end of April.
The step-down came after weeks of public protest, the resignation of the Finance Minister and a Constitutional Court decision on January 24 declaring the property declaration rule to be against the constitution.
"This law could endanger the right to protection against unjustified invasions of personal and family life, as well as against unjustified collection of data on individuals," said Constitutional Court Chief Justice Ján Mazák in explanation of the verdict.
The Finance Ministry defended its earlier law, saying property declarations were used in countries such as France and Germany, and arguing the forms were an important way of combating tax fraud.
An expert group from the International Monetary Fund which visited Slovakia in January advised the country to create a corps of tax police to combat what it called a serious problem with tax evasion.
The property law had given the authorities power to levy a 38 per cent tax on the worth of any increase in assets that could not be explained from reported income. Similar property declarations were filed by Slovaks in 1993, 1995 and 1998, although they do not offer a basis for comparison.
However, tax experts criticised serious shortcomings in the law which they blamed on poor conception.
Although the tax office, which reports to the Finance Ministry, expected 4.2 million people to submit forms, it failed to print enough blank copies, causing shortages in early and late January.
And although the law said that people could download copies of the form from the ministry's website and submit them electronically, in practice this proved impossible because the country lacks an electronic signatures law giving such documents the legal weight of paper forms.
Nor could the ministry forms be filled out electronically; they had to be printed and completed manually.
"Submitting forms electronically proved to be someone's daydream," said tax expert Július Fehér.
No explanation was given by the Finance Ministry as to why the law did not cover the period from January 1998 to September 1999, leaving tax experts scratching their heads as to why only property accumulated since then need be disclosed.
Criticism was also aimed at the exhaustive list of non-real estate assets that had to be declared, including coin collections, music instruments, shoes and undergarments.
Remi Troch, director of the tax department at the Deloitte & Touche advisory firm, said: "A lot of people criticised the law because there were many changes, and they didn't know how these changes would be applied.
"It's also too complicated and time-consuming, and it's strange to be counting things like underwear on a property statement."
The Finance Ministry has been criticised by tax experts in the past for producing unclear laws, and for being unwilling or unable to give interpretations of its own legislation.
Paul Stewart, a partner in the Bratislava office of the Arthur Andersen advisory firm, told The Slovak Spectator last fall that he had been "quite disappointed with the way the tax authorities administer and regulate tax law."
"In other countries you usually visit tax authorities seeking either clarification of a law or to get a position... Here, the tax authorities sometimes respond with comments like 'You're the high-paid tax advisors - you interpret the law'. From my background this is an unworkable situation. They are there to assist with administration and interpretation."
The furore over the property tax declarations was, for the leadership of the ruling coalition SDĽ party, the last straw in its long feud with Finance Minister Brigita Schmögnerová, an SDĽ appointee to the position whose policies the party felt were too far to the right.
"The situation in the SDĽ is serious in connection with wrong steps the minister has taken," said SDĽ leader Pavol Koncoš before announcing Schmögnerová's dismissal.
However, Schmögnerová rejected the inference that she had made a mess of the tax law, and said the party had been trying to get rid of her since she challenged the leadership at a national congress last year.
"But I never imagined they would pick such a stupid excuse [to fire me] and use it in such a primitive manner," she said.
Ladislav Orosz, the head of the SDĽ caucus and a close supporter of Schmögnerová, said he suspected opposition to the property declaration law had deeper roots than merely civil unrest.
"I'm expecting to see attempts in parliament to have the property declaration requirement scratched altogether [instead of just for people acquiring less than Sk1.5 million in the set period]," he said. "We have strong indications that the campaign against property declarations had a different goal than protecting citizens. Property declarations, especially after the recent changes, created a serious threat for a few rich people. That's what this is all about."
4. Feb 2002 at 0:00 | Tom Nicholson