Bisnode: 4,701 Slovak companies left for tax havens

In the past year the number of Slovak companies domiciled in tax havens has grown; and this increase is expected to continue.

Paying taxes, illustrative stock photo. Paying taxes, illustrative stock photo. (Source: Sme)

The total number now represents an increase of 211 percent compared to 2005, according to a survey carried out by the consulting and data firm Bisnode.

As many as 4,701 companies have left Slovakia over the past decade in favour of countries where it is worthwhile to be domiciled thanks to a favourable tax environment. According to Bisnode consultant Milan Seliak, Slovakia reported the highest (19 percent) increase in outflow of firms to tax havens in 2006 and 2007, during the first Robert Fico-led Government.         

“Business-people react sensitively to change,” Seliak said, as quoted by the TASR newswire. “At that time, the government announced changes in the business environment and did not hide its intention to significantly tighten control of companies and ratchet up tax collection.”      

However, the biggest year-on-year outflow of companies came later, particularly in 2012, when Iveta Radičová’s government was in the midst of its meltdown. In that year, the number of companies that left for tax havens was 566 higher than a year earlier.

The top three tax haven destinations for Slovak companies are the Netherlands, the USA and Cyprus. As many as 3,121 companies moved to these countries to avoid their tax duties between 2005 and 2015, and these represented 66 percent of the total number of Slovak firms domiciled in tax havens. The Netherlands is chiefly used by holding companies, since they do not have to pay a dividend tax there. “The US is characterised by a high rate of ownership anonymity, however, the US is also interesting thanks to lower taxes and finally, companies residing across the Atlantic Ocean are more credible to their partners,” Seliak explained.      

Slovak firms preferred Cyprus as a destination last year. A total of 917 Slovak companies left for there, 167 more than a year ago. “Despite economic instability, Cyprus is still an EU member state and, therefore, it is not subject to dual taxation,” according to Seliak.

Bisnode expects the outflow of companies to tax havens to continue. “As long as the tax burden is growing, firms will leave for destinations with low taxation,” Seliak opined. “If there are frequent legislative changes, companies will opt for countries that protect their property rights.”

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