PM Fico presents fiscal consolidation package

Slovakia’s Prime Minister Robert Fico has presented a fiscal consolidation package with 22 proposed measures to decrease the state deficit below 3 percent of GDP, the Sme daily reported on June 19.

Slovakia’s Prime Minister Robert Fico has presented a fiscal consolidation package with 22 proposed measures to decrease the state deficit below 3 percent of GDP, the Sme daily reported on June 19.

The total impact of the package on the public deficit for 2013 should be about €2.3 billion, which is about €600 million more than the sum the government needs to cut the state deficit to meet the Maastricht criteria, according to some estimates. Sme wrote that Smer party has reserved the possibility, however, to withdraw some of the measures or to use any additional revenue for other purposes.

The €600 million could serve as a cushion in the event that the Slovak economy’s outlook worsens before the actual budget is approved. Fico’s package includes primarily increases in taxes of nearly €1 billion a year, followed by about €500 million flowing into the state pension scheme by reducing payments into Slovakia’s second pension pillar from 9 percent to 4 percent of salary. The package also plans to reduce state expenditures by €600 million through reduction of wages in state administration by 5 percent and reducing other current expenditures by 10 percent, Sme wrote.

The Hospodárske Noviny daily reported that the biggest surprise in the package is a proposal to curb the retirement pensions of policemen, soldiers and fire fighters. The government proposes to limit valorisation of their retirement payments and to impose a tax on these pensions next year, with the daily noting that retirees will probably have to pay the income taxes until they reach normal retirement age.

The chair of parliament’s financial committee, Smer MP Daniel Duchoň, said that curbing of valorisation of these public sector pensions is necessary because there is not enough money for these pensions, which were to be increased as of July, in reserves. He explained that freezing the salaries of armed forces, which occurred last year, as well as a freeze in the amount of payroll tax paid by them remains in place.

The head of the INEKO institute, Peter Goliáš, recommended abolishment of the retirement payments for these public employees and that a special additional payment on the salary would be more effective.

The fiscal consolidation package also include taxation of individuals’ bank deposits; additional tax on banks; higher taxes for tobacco and gambling introduced earlier; higher taxation of regulated companies, and end of the flat 19 percent income tax, higher taxes on two or more properties, higher taxes on dividends, higher levies for the self-employed and part-time and seasonal workers, to not scrap the concessionary fees paid for public-service radio and television and others, Sme reported.

Source: Sme, Hospodárske noviny

Compiled by Radka Minarechová from press reports
The Slovak Spectator cannot vouch for the accuracy of the information presented in its Flash News postings.

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