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Economic crisis will significantly increase government deficit for 2009

The economic crisis will contribute to the widening of the general government deficit by a total of by 4.2 percent to 4.6 percent of GDP, said Viktor Novysedlák of the Finance Ministry’s Financial Policy Institute in a discussion forum organized by the INESS non-governmental institute. According to the ministry’s prognoses, the general government deficit is expected to reach 6.34 percent of GDP this year, the SITA newswire reported.

The economic crisis will contribute to the widening of the general government deficit by a total of by 4.2 percent to 4.6 percent of GDP, said Viktor Novysedlák of the Finance Ministry’s Financial Policy Institute in a discussion forum organized by the INESS non-governmental institute. According to the ministry’s prognoses, the general government deficit is expected to reach 6.34 percent of GDP this year, the SITA newswire reported.

INESS recommended that the income tax rate of private individuals and corporate entities should not be increased in the short-term. However, the institute said that from the mid- and long-term perspective it is necessary to consider whether the structure of the tax burden is optimal and that a potential tax hike must be preceded by discussion at all levels.

Economist and the Freedom and Solidarity (SaS) party chairman Richard Sulík said that the current discussion on tax increases are the result of the government’s irresponsible attitude toward public finances. He said that instead of increasing taxes it is necessary to widen the tax base, SITA reported.

The ministry’s Financial Policy Institute opened the issue of possibly increasing taxes in Slovakia last month when it said in its analysis that the low redistribution rate throughout public finances raises the question of whether the tax burden at a higher level would not be justified. However, the institute suggests that Slovakia focus on raising the effectiveness of collection of taxes due as well as social and health insurance payments, rather than on raising tax and insurance premium rates, SITA wrote. SITA

Compiled by Michaela Stanková from press reports
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