CHANGES AFFECT THE COURTS, STRATEGIC COMPANIES, TAXES AND PENSIONS

Many bills adopted in 2009 targeted the crisis

AS IN other countries, the global economic downturn was the main factor affecting Slovakia last year. In order to mitigate its impacts and boost the country’s economy, the Slovak government adopted a series of anti-crisis packages, including new legislation. Other laws were adopted which are expected to have significant effects, positive as well as negative, on the whole of society. For instance, the law which launched the Specialised Court is regarded by observers as positive, while the law on strategic companies is perceived as the most problematic.

The Specialised Criminal Court sits in the same Pezinok premises as the Special Court used to.The Specialised Criminal Court sits in the same Pezinok premises as the Special Court used to. (Source: SITA)

AS IN other countries, the global economic downturn was the main factor affecting Slovakia last year. In order to mitigate its impacts and boost the country’s economy, the Slovak government adopted a series of anti-crisis packages, including new legislation. Other laws were adopted which are expected to have significant effects, positive as well as negative, on the whole of society. For instance, the law which launched the Specialised Court is regarded by observers as positive, while the law on strategic companies is perceived as the most problematic.

“The impact of some bills adopted last year will be more long-term, even though no constitutional bills were adopted since the ruling coalition does not have a constitutional majority in the Slovak Parliament,” Grigorij Mesežnikov, a political analyst and president of the Institute of Public Affairs (IVO), told The Slovak Spectator.

Among the new legislation which he said would have a positive influence on society, Mesežnikov listed the law establishing the Specialised Court.

“Parliament responded very quickly to the verdict of the Constitutional Court that ruled the Special Court unconstitutional,” Mesežnikov said. “I believe that it should be regarded as positive that the launch of the Specialised Court was approved very quickly.”

The Constitutional Court ruled on May 20 that the Special Court – which had been set up to tackle high-level state corruption and organised crime – was unconstitutional, but said that its previous verdicts would remain valid.

Prime Minister Robert Fico subsequently came up with an initiative to create a Specialised Criminal Court to replace the Special Court, a proposal which was approved by parliament on June 18. The new court’s competences go beyond those of the Special Court: it will also hear cases of premeditated murder, subversion involving public procurement and public auctions; falsifying, changing and unauthorised production of money and shares; and abuse of authority by public officials.

Specialists from the Slovak arm of KPMG, a global audit, tax and advisory services company, also perceive this new legislation, which also enables better protection of judges and specialisation on certain types of criminal activities, as an important part of the fight against crime, Viliam Kačeriak, Forensic Services Manager, KPMG in Slovakia, told The Slovak Spectator.

Mesežnikov listed among other new legislation that he believes will have a positive impact a revision to the law on the assets of municipalities. Even though this was rather a small revision, he believes that the law, adjusting the way that the assets of municipalities are sold and rented, will contribute to transparency and competition when selling municipal assets.

“This is important because, alas, methods of corruption and cronyism are decentralising,” he said. “The aim of this revision is to prevent decentralisation of these methods.”

Parliament adopted the revision to the law on the assets of municipalities on June 16, effective as of July 1, 2009.

Mesežnikov also listed a legal change to the immunity of parliamentary deputies. Now, if MPs are involved in a traffic accident, they cannot avoid a breath or blood test without penalty.

“Even though this issue is related to a very small number of Slovak citizens, this is a demonstratively positive feature giving citizens the feeling that at least on this issue there are not different rules for different groups of people and that there is only one standard.”

On February 17, 2009, parliament adopted a revision to the law on offences, valid as of April 1, 2009. According to it, MPs who are involved in car accidents are no longer able to refuse to undergo tests for alcohol or other intoxicating substances. If an MP refuses to be tested for alcohol following a car accident, it will be possible for him or her to be prosecuted as any other citizen would be.

The revision was ‘inspired’ by the case of Miklós Duray, an opposition MP for the Hungarian Coalition Party (SMK), who refused an alcohol test after he was involved in a car accident in October 2008.

The IVO president believes that the immunity of parliamentary deputies should be further narrowed, but does not expect this to happen in the near future.

Mesežnikov views the anti-smoking law extending the protection of non-smokers as a generally positive move.

“The anti-smoking bill is in line with the trend in Europe,” he said, but pointed out that as tobacco is a legal drug, smokers should not be discriminated against.

“Certainly the opinions of smokers and non-smokers on this bill differ,” said Mesežnikov. “But the trend itself is positive because limiting bad habits is to be welcomed. But this is a specific bad habit and thus society should not discriminate against people suffering from it, while limiting them is OK.”

The law on the protection of non-smokers, passed by parliament in February 2009, came into effect on September 1 and, despite facing criticism for being inaccurate and ineffective, it has cleared the air in most Slovak restaurants, cafés, bars and pubs. According to the amended law, if a restaurant, pub or similar facility wants to allow smoking within its premises, it has to have a separate room for smokers, divided from the rest of the establishment by a solid wall. To avoid complications and reconstruction, many restaurant or pub owners have opted to go entirely non-smoking.

Mesežnikov regards much of the legislation passed during the last year as negative and controversial.

“Here I would list the revision to the language law,” he said. “This is one quite unfortunate bill which, I dare to say, has weakened the country’s international standing.”

The political analyst stressed that the revision, drafted by the Culture Ministry, was not a response to a problem or a problematic state. He regards the arguments used for its justification to be misleading.

“The bill complicated relations between Slovaks and Hungarians here in Slovakia and between the republics of Slovakia and Hungary,” he said. “This was a completely needless bill.”

Parliament passed the amendment to the State Language Act on June 30. The bill introduced fines of up to €5,000 for the use of incorrect Slovak from September 2009, and enabled stricter official supervision of the use of ‘correct’ Slovak. The government's guidelines for implementation of the amended State Language Act became effective as of January 1, 2010. Until this time the Culture Ministry did not issue fines stemming from violations of the law.

Mesežnikov also listed amongst problematic laws the law against extremism, especially the so-called anti-extremist amendment to the Penal Code.

“Here are some ‘rubber’ [i.e. flexible] articles, which, under certain circumstances may be abused by the dominant political powers against their political opponents,” said Mesežnikov, adding that for now Slovakia is not in such a situation, but such a possibility is already here.

Parliament adopted the revision on February 28, 2009, and it became effective as of September 1, 2009. The amendment defines extremism, an extremist group, and extremist material, as well as the particular motive of a criminal deed, and changes the subject matter of violent criminal deeds against a group of people and hooliganism.

According to Mesežnikov, other problematic bills include a revision cancelling military courts, which he said also attracted criticism amonglawyers.


Fighting the economic crisis



Tomáš Kuča from the Slovak branch of PricewaterhouseCoopers, a global audit, tax and advisory services company, regards 2009 as having been a fruitful year when it came to law changes and amendments in Slovakia.

“A number of significant newly adopted laws were driven by the government's best efforts to respond to the economic crisis,” Kuča told The Slovak Spectator. ” I perceive some of the amendments and laws approved in the first half of 2009 as positive changes aimed at helping both individuals and companies. These were, for example, the April changes to the Act on Employment Services, or the research and development incentives adopted in August.”

Analysts in general regard the law on strategic enterprises approved in November as being controversial.

“The law on strategic companies has started numerous discussions across the entire political spectrum as well as in the business community and I believe it will now be very important to observe how often and in what circumstances it will be applied,” said Kuča. According to Mesežnikov, the bill goes against the principles of a free market economy.

Dušan Zachar of the economic think tank the Institute for Economic and Social Reforms (INEKO) believes that the impact of the law will be the opposite to that envisaged by the government, which says it wants to use it to save jobs and maintain production in companies which are economically important to the country and which have found themselves in major difficulties.

“Overall, we have seen a number of positive changes in Slovak legislation in 2009 and I am positive also about the fact that the Act on Bankruptcy and Restructuring [Act No. 7/2005 Coll.] was already in place before the economic crisis, although it is still not used as often as it should be due to the historical lack of trust in the restructuring process,” said Kuča.

Parliament also responded to the global financial and economic crisis through a number of legislative changes which were related to taxes.

“The tax and business community appreciated the increase in the input price of tangible and intangible assets, the increase in the non-taxable part of the tax base for the individual taxpayers and the simplification of tax records for the self-employed persons after meeting statutory requirements,” Jeff Black, the partner of the tax department at Deloitte Slovakia, told The Slovak Spectator.

The amendment of the Income Tax Act increases the limit for the input price for tangible assets to €1,700, and the limit on the input price for intangible assets to €2,400. It also increased the non-taxable part of the tax base of individual taxpayers for 2009 and 2010. For taxpayers with 2009 annual income of up to €15,387.12, the non-taxable part of the 2009 tax base is €4,025.70. To compare, in 2008 the non-taxable part of the tax base was €3,269.47.

In the tax sphere, Kuča of PricewaterhouseCoopers highlighted the revision to the law on value added tax (VAT) that relates to creating a VAT group for organisationally, financially and personally linked companies meeting specified criteria.

KPMG specialists recorded several measures taken within banking and risk management during 2009. These include, for example, the law on measures to mitigate the impact of the global financial crisis on the banking sector. However, as KPMG stressed, the Slovak banking sector has been stable over the long term and Slovakia is one of nine EU countries in which the government has not needed to participate in propping up the banking sector. According to KPMG, the Slovak Banking Association (SBA) regards this law to be precautionary and it has not been used so far.

In February 2009 the SBA signed, along with the Slovak government, a memorandum on cooperation to address the impacts of the financial and economic crisis. An application of this measure in real life is the programme of assistance to bank clients who find themselves unable to repay their housing loans. Eleven banks have joined this programme and KPMG specialists believe that some bank clients will use this measure as returnable assistance.


Effects of anti-crisis measures questioned



INEKO’s Zachar said he views the anti-crisis laws and government measures adopted, from the viewpoint of their impacts on the country’s economy as well as society in general, to be more harmful than beneficial. He welcomed the changes by which the government, but only during the period of the economic crisis, has mitigated the impacts of the crisis on the business sphere as well as on citizens.

“These include, for example, the innovative ‘flexi-account’ incorporated into the Labour Code from praxis,” Zachar told The Slovak Spectator, adding that this helps employers as well as employees to live through bad times. Within this scheme, workers stay at home and receive wages during periods when a company does not have orders and does not produce. After production resumes, workers work off these hours from this ‘account’ in the form of overtime hours.

Other anti-crisis measures praised by Zachar include a relaxation in tax-administration duties by businesses, especially small ones, and a moderate reduction in the tax and compulsory contribution burden for some groups of citizens.

In the tax area, Zachar also praised a cut in the period for return of excess VAT payments or faster depreciation of assets.

But Zachar said he believes most of the anti-crisis measures have brought hardly any positive effects.

“Even the Slovak Academy of Sciences has stated that the government’s set of measures cannot be perceived as ‘optimal, convincing, striking and targeted’,” said Zachar. “I believe that these were often acts of marketing: for example, the car-scrapping bonus, which either has not harmed the economy or, in the worse case, has contributed to a significant deepening of Slovakia’s debt over 2009. Parliament even had to revise the state budget law for 2009 to ‘legalise’ a tripling in the public finance deficit compared to the original plan.”

Zachar also pointed to what he called legislative attacks by the ruling coalition on the privately managed part of the old-age pensions saving scheme, known as the second pillar.
He believes that by reducing the charges clients pay to pension fund management companies for managing their pension funds, and by enacting a so-called guarantee fund so that the accounts of pension savers do not fall below the principal sum they have invested, the second pillar has become less attractive for the pension fund management companies as well as savers.

On March 11, parliament adopted a revision to the law on old-age pension saving.

Beginning on July 1, 2009, the fixed fee for administration of second pillar pension funds was cut from 0.065 percent to 0.025 percent of the net monthly value of the participant’s assets in the fund.

Under the new legislation, the pension fund management companies were obliged to launch a guarantee fund for each of their pension investment funds. At six-month intervals the pension fund management companies must now compare the yields in their pension funds with a benchmark and in the event of loses must cover them from the guarantee fund.

According to Zachar, the pension fund management companies have responded to this change by a massive sell-off of stocks at a time when their prices had started to increase and it would have been better to be buying them.

“In this way the pension fund management companies have lost an opportunity to achieve higher profits and savers to have higher pensions,” said Zachar.

According to Zachar, the Slovak government also adopted bills last year that significantly increasing so-called moral hazard – i.e. by encouraging behaviour harmful to society, and disincentivising people from playing by the rules and being honest.

“Among these, for example, are revisions enabling forgiveness of penalties stemming from due compulsory payments to the social security provider Sociálna Poisťovňa (the general pardon) or the ban of distraint proceedings against hospitals which, however, does not apply to private hospitals, something that is probably unconstitutional.”


What is missing



With regards to legislation that Slovakia still lacks, Mesežnikov, the political analyst, highlights a constitutional law on national minorities, which has still not been adopted. The issue is one which has been dragging on for many years. Mesežnikov sees this piece of legislation as important because the Slovak constitution counts on a special law setting out the rights of members of minorities in Slovakia.

“There are some laws on whose bases minorities’ rights are defined and performed,” said Mesežnikov, adding that a closer analysis shows that the current related legislation is not drafted in a way that avoids problems arising. “The constitutional law would arrange the whole issue in order that no doubts occur and provisions are unambiguous in order to satisfy minorities. This used to be a theme of previous parliamentary terms, when alas, even governments more inclined to achieve a solution did not have enough power to push through such a law. The current cabinet, which is nationalistic, I think, completely rejects the idea of such a law.”

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