Loss in tax income lower than expected

Instead of €2 billion, the state lost only €42 million in tax income, the latest prognosis suggests.

Illustrative stock photoIllustrative stock photo (Source: TASR)

The state lost less in tax incomes than originally predicted.

Instead of losing €2 billion on taxes in 2020, as predicted at the beginning of the pandemic, it lost €42 million, according to the Finance Ministry's recent tax prognosis.

Despite the expected slowdown in economic growth due to the third pandemic wave, tax income should grow by around 5 percent in 2021.

“In the following years, tax income should rise by up to 7 percent, particularly thanks to the EU funds from the ending programming period and the Slovak Recovery and Resilience Plan,” the ministry said, as quoted by the SITA newswire.

Corporate income tax and VAT

The highest drop in tax and payroll tax incomes was reported in the sectors hit the hardest by the pandemic, i.e. gastronomy, the hotel industry and art and culture. The drop was reported particularly in the case of corporate income tax.

The biggest auditors, accountants and tax advisors in Slovakia Read more 

“However, the long-term outlook on the data suggests that these sectors did not contribute much to the total corporate income tax even before the pandemic,” the ministry said, as quoted by SITA.

The highest drop was reported by small companies with a turnover below €100,000 – 25 percent – but they only make up a small share of the total tax.

At the same time, the ministry noticed a positive development in the collection of value-added tax (VAT).

“Strong VAT in the second quarter of 2021 contributed to the 7-percent annual growth in yields and the return to pre-crisis figures,” the ministry noted, as quoted by SITA. “Stronger VAT growth reflects the increase in the effective tax rate exceeding the yield that was predicted based on macroeconomic quantities.”

No surprises on the labour market

Slovaks worked record 190 days this year to pay taxes and levies Read more 

The development of the labour market in the second quarter of 2021 did not bring any big surprises.

The yield from income tax, social payroll levies and health insurance transfers followed the June prognosis, according to the ministry.

However, the third pandemic wave may bring some slowdowns at the end of the year, which will be reflected in the lower yield. On the other hand, stronger market recovery in the following years should increase the expected tax income, it added.

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