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Controversial VAT hike debated

The Slovak government is considering raising the nation's Value Added Tax (VAT) April 1 in an attempt to bring an additional 8 to 12 billion Sk into the 1999 state budget. But the hike, which would push up prices on basic consumer goods, has already become a source of political conflict between left and right wing ministers in the Slovak cabinet.
Deputy Prime Minister for Economy Ivan Mikloš, a member of the conservative Democratic Party (DS), said at a February 15 press conference that the cabinet was planning to increase the minimum VAT rate from 6% to 10% or 12%.
But scarcely were the words out of his mouth when Brigita Schmögnerová, the highly-regarded left-leaning Finance Minister, said that the increase had not yet been settled on and that the ministry was carefully considering other options.

The Slovak government is considering raising the nation's Value Added Tax (VAT) April 1 in an attempt to bring an additional 8 to 12 billion Sk into the 1999 state budget. But the hike, which would push up prices on basic consumer goods, has already become a source of political conflict between left and right wing ministers in the Slovak cabinet.

Deputy Prime Minister for Economy Ivan Mikloš, a member of the conservative Democratic Party (DS), said at a February 15 press conference that the cabinet was planning to increase the minimum VAT rate from 6% to 10% or 12%.

But scarcely were the words out of his mouth when Brigita Schmögnerová, the highly-regarded left-leaning Finance Minister, said that the increase had not yet been settled on and that the ministry was carefully considering other options.

The 6% VAT rate is levied on basic food commodities such as bread, milk and meat and other items of general daily use. According to Mikloš, the hike is a necessary measure to buoy the debt-ridden Slovak budget and help the government meet the revenue targets it has set.

"Every increase of the rate by a single percent would bring some 2 billion Sk into the budget, so this tax increase would bring in 8 to 12 billion Sk ($211-352 million)," he said. Mikloš added that in about two years the government would also lower the top VAT rate from the current 23%, but refused to specify the level to which the rate should be lowered.

When questioned about the proposal afterwards, however, Schmögnerová, who is a member of the reformed communist Party of the Democratic Left (SDĽ), said it was premature to speak about an actual hike. Her aides said that the ministry wanted to consider other measures

"It's an important political decision and it should first be discussed by the coalition council [on which sit members of the four ruling parties]," Schmögnerová said.

She added that making administrative improvements in areas such as tax collection could bring 1 to 1.5 billion crowns into the budget without a hike.

Finance Ministry State Secretary Viliam Vaškovič said his ministry was considering the hike as one of the possible measures it could apply in case of negative developments in the country's economy.

"Anything can be considered, but trying to grab money for the budget by hook or by crook is useless," Vaškovič said.

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