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Fewer new businesses start in 2014

SLOVAKS have lost their zest to do business, with the number of newly-established businesses hitting a record low last year even though the economy was relatively thriving. 

(Source: Sme)

While business people and market watchers see tax licenses and other measures worsening conditions for doing business as behind this, the state defends the licenses.

A total of 13,053 companies were launched in Slovakia in 2014. This was almost 50 percent less than in 2013 and the lowest number in the last six years. The type of company did not matter, as Slovaks were reluctant to set up either joint stock companies or limited liability companies.

“Even with Slovakia’s economy relatively thriving, the interest in new businesses is at the freezing point,” said Július Sauer, country manager of Bisnode, as cited in the company’s press release. “This is linked with the business environment and tightening of conditions for doing business.”

He noted that this is not good news for the economy as a whole and is paradoxical that fewer companies are being launched in a period when the economy is growing the fastest in the eurozone.

Firms and analysts see tax licenses as a distracting factor. The Fico government launched this duty in 2013 for all companies, including those loss-making, to pay a yearly license. The lowest license for non-VAT payers with annual turnover up to €0.5 million is €480. The highest license is €2,880.

“Under such conditions nobody wants to do business,” Rastislav Machunka, vice-president of the Federation of Employers’ Associations (AZZZ), told the Sme daily. “He prefers working eight hours, going home and being left alone.” The state does not motivate him in any way to endeavour more, rather the contrary. “It keeps changing laws and increasing the burden [on the shoulders of business people] and in this way distracts people.”

Martin Hošták, the secretary of the National Union of Employers (RÚZ), added that the tax license has a huge influence over business people starting out.

“It may distract not only speculators who launch joint stock companies to sell them later, but also honest people,” admits Hošták.

The state has defended the tax licenses and does not see them as being liquidating or having a negative influence on business people.

“Their aim was fairer taxation of companies that have been avoiding paying taxes over the long term,” Alexandra Gogová, spokesperson of the Finance Ministry, told the Sme daily, adding that companies have a chance to deduct tax licenses from their tax duties during the next three years in case their businesses do not thrive.

“We expected that dormant or long-term inactive companies would be cancelled,” said Gogová. “Any thoughts that licenses prevent new companies from being launched are baseless.”

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