Slovakia’s tax system improves

The only obstacle to better tax system evaluation is high taxes and payroll tax burden.

Illustrative stock photoIllustrative stock photo (Source: Sme)

Though the system of paying taxes in Slovakia has not changed much compared with last year, its evaluation has improved in the overall ranking.

The country ranked 49th out of 190 countries surveyed in the Paying Taxes 2018 study issued by the World Bank and consulting company PwC, moving up by seven positions. Compared with the other countries in the Visegrad Group (V4) region, it scored the best, the SITA newswire reported.

The only obstacle to better tax system evaluation is high taxes and payroll tax burden, especially in connection with labour, PwC informed.

Time taken to comply with taxation is good, but not enough

The ranking was prepared based on the legislation valid at the end of 2016. The basic parameters for Slovakia, which include the total time needed to comply with taxation, and the time needed to comply with profit, labour and consumption taxation, did not change. It still takes 192 hours to comply with the taxation of a case study company, while the firm needs 46 hours for profit tax, 62 hours for labour tax, and 84 percent for consumption tax.

The better position in ranking was impacted by the change in the evaluation of the tax systems of other countries, SITA reported.

The time necessary to comply with taxes in Slovakia is the shortest in the V4 region. In the Czech Republic, which placed 53rd, it is 248 hours, while in Poland (51st) it is 260 hours and in Hungary (93rd) 277 hours.

Slovakia, however, still has big reserves when compared with the countries with the best ranking in this parameter. In Estonia, for example, which placed 14th the total time required is only 50 hours, SITA wrote.

Tax burden high

Slovakia’s position from the point of the total tax burden is much worse, though. The Total Tax & Contribution Rate amounts to 51.6 percent, which is 12 percentage points more than the average of the European Union countries and the European Free Trade Association (EFTA), where it amounts to 39.6 percent. It is even higher than the average of all surveyed countries, which amounts to 40.5 percent.

“Regarding its tax legislation at the end of 2016, Slovakia has the fifth highest tax burden in the EU and EFTA countries,” the report reads, as quoted by SITA.

The labour tax amounts to 39.7 percent, while profit tax is 10.5 percent and other taxes 1.4 percent of the total tax and contribution rate.

“Apart from the continuing electronisation of tax administration, the reduction of the labour tax rate and the simplification of the tax system, including the tax rates structure, may contribute to improving ‘the tax grade’ of Slovakia,” said Christiana Serugova of PwC Slovensko, as quoted by SITA.

The latest legislative changes that increase the caps for payroll tax levies and the threat to abolish the limits for health transfers will not improve Slovakia’s position in comparison with its close neighbours, she added.

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