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Controversial tax instrument ends

Cancellation of tax licenses will cost state coffers €115 million this year.

Tax returns, illustrative stock photo(Source: Sme)

Tax licenses, improved tax justice with minimum administrative costs and their cessation will cost the state budget approximately €115 million this year, analysts of the Institute for Financial Policy (IFP) think tank running under the Finance Ministry have calculated.

Based on the agreement of the current coalition of the Smer, the Slovak National Party (SNS) and the Most-Híd parties, the tax licenses were cancelled after four years at the request of the SNS. Companies will pay them for the last time in 2018 for the taxation year of 2017.

“The tax licenses have met their goal,” the analysts write in their analysis. “They contributed to the increase of tax revenues with a more balanced distribution of the tax burden.”

The second Robert Fico government introduced compulsory tax licenses within consolidation measures in 2014 as a tool to wipe out dormant companies as well as to get more money into state coffers, since a large portion of Slovak companies had managed their operations and accounting books in a way that avoided corporate taxes.

There were three tax licence rates introduced: €480 to be paid by companies that are not value added tax (VAT) payers, €960 paid by VAT payers, and €2,880 paid by all companies with revenues greater than €500,000. Companies were able to reduce their tax duties through paid licenses over the following three years.

Read also: Read also:Tax licenses remain controversial

The introduction of tax licenses was accompanied by a wave of criticism from the business sector but concerns that this measure would mean the cessation of active companies did not materialise, according to the IFP.

“The tax license did not have any significant negative influence over newly established companies,” said Peter Harvan, head of the department of tax revenues and fiscal analyses.

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