Podľa Radovana Ďuranu z INESS nemôže byť
nižšie daňové zaťaženie na Slovensku v porovnaní s inými európskymi
krajinami používané ako argument v prospech zvyšovania daní. O zvyšovaní
daní by sa podľa neho dalo hovoriť až po prehodnotení výdavkov vlády, ktoré za
posledné tri roky narástli o tretinu, pričom inflácia dosiahla za toto
obdobie nárast asi o 10%, povedal pre The Slovak Spectator dňa 5.10. 2009.
THE GLOBAL financial and economic crisis has laid a number
of challenges at the doors of national governments as decreasing economic
activity is cutting tax revenues and tempting officials to raise taxes to patch
gaps in state budgets.
Slovakia has not avoided this temptation. While Finance
Minister Ján Počiatek has floated the possibility of some tax increases, the
upcoming parliamentary elections scheduled for 2010 have dampened enthusiasm
for such an approach. The Finance Ministry has only introduced higher taxes for
alcoholic spirits and a new tax on poker games which will come into effect
later next year.
While the opposition is calling for tax cuts to stimulate
the economy, the finance minister does not see a reason for this, arguing that
the burden of taxes and social security contributions in Slovakia is the lowest
in the EU.
“The tax system we have is designed for good times,”
Počiatek said in early July, as cited by the SITA newswire. “The burden of
taxes and social security contributions in Slovakia is the lowest in the EU.”
According to him, the Slovak tax system is based on a growth
model, i.e. it assumes annual growth in economic activity and budget revenues,
that the country cannot avoid a discussion about changes in the current tax
system.
Tax experts see Slovakia’s overall system as generally good,
praising its low corporate income tax rate and its relative simplicity. In
Slovakia, corporate entities as well as private individuals pay a flat income
tax of 19 percent.
Instead of increasing taxes, these experts would rather see
cuts in government spending. They suggest that when potential tax changes are
considered, decisions should be based on their long-term impacts on the
economy.
“I believe the tax system is generally good and if it was up
to me I would not change it substantially,” Branislav Ďurajka, Tax Partner of
KPMG in Slovakia told The Slovak Spectator. “In good times it was indeed able
to generate more tax revenues than was expected when the 2004 tax reform was
enacted. It appears that the system may generate less revenue during a
recession, as it is quite susceptible to a decrease in gross domestic product.”
However Ďurajka finds this to be a positive feature because
in difficult economic times the tax burden on businesses and consumers becomes
lower, which can stimulate a faster recovery. He thinks that during a crisis a
responsible government should react to decreased tax revenues by reducing
public expenditures rather than increasing taxes, which is exactly the opposite
of what governments like to do.
“To me, trying to help the economy recover by increasing
taxes is like trying to revive a half-dead man by strangling him. Therefore I
believe that the tax system should not be changed,” Ďurajka said.
Stan Jakubek, Country Managing Partner and Head of Tax
Services at Ernst & Young, believes that any tax system is susceptible to
an economic downturn of the magnitude that we have recently experienced.
“Slovakia, like all our European neighbours, is currently
facing some real challenges resulting from shortfalls in the state budget,”
Jakubek told The Slovak Spectator. “We will need to respond to these challenges
through a reduction in spending and strategies to increase state revenues.
However, any decisions, be it on controlling spending or changes to tax
legislation, should be considered based on their long-term impact on the
economy and not be driven to fill a short-term gap.”
Radovan Ďurana, of
the Institute of Economic and Social Studies (INESS) economic think tank, told
The Slovak Spectator that the expenditure policies of the government of Prime
Minister Robert Fico were based on the premise that tax incomes would rise each
year. This has resulted in a steep increase in the budget deficit. He does not perceive
Slovakia’s tax system to be overly sensitive to swings in the economic cycle.
“This is because
almost three-quarters of tax revenues come from sources with a relatively low
sensitivity, or a slower response, to economic decline,” Ďurana said. “These
include, in particular, indirect taxes such as the value added tax, excise
taxes and income taxes of private individuals.”
According to Clare Moger, Director of the Tax Department at
PricewaterhouseCoopers, Slovakia’s fairly low corporate income tax rate helps
the country to remain attractive to investors during the economic downturn, as
does the relative simplicity of the tax system.
“This is important since losing large investors during the
downturn would significantly increase unemployment as well as reduce GDP and
the amount of tax received by the state,” Moger told The Slovak Spectator.
Tax structure viewed positively
“In general, I would not say that there are fundamental
issues with the structure of taxes in Slovakia,” said Jakubek. “It has,
however, been broadly recognised that we have a tax system that is very
administratively burdensome. Although there have been some steps taken to
address this issue, more work needs to be done. I do believe that there is
still a lot of value to be gained through reduction of administrative costs and
a focus on effective and efficient collection of taxes rather than on the
structure of taxes."
Ďurajka likes the current structure of taxes because the emphasis
is on indirect taxes, which he thinks is the correct approach.
“Taxing consumption is better for the economy than punishing
initiative, that is, by progressive taxation of income or by taxing
accumulation of wealth,” he told The Slovak Spectator. “There are a lot of
theoretical and empirical proof of this.”
Moger sees the low corporate and personal income tax rates
and the system’s simplicity as the key advantages of Slovakia’s current tax
system. She believes that these factors help to reduce tax evasion and
encourage investment.
“However, payroll taxes, particularly contribution rates for
social security, are high relative compared to countries in the region,” she
said.
Ďurana of INESS does
not see a need for a significant change in the current structure of taxes
either but he sees the need for a reduction of tax rates.
To cut or not cut taxes?
The debate over whether to cut taxes during an economic
crisis constantly emerges in Slovakia. While Finance Minister Počiatek does not
see a reason for tax cuts at this time from his point of view as a member of
the government with goals it is seeking to reach, other experts believe that
tax cuts would help the economy.
“Yes I do,” said Ďurajka when asked whether he sees a need
for tax cuts. “Whether politicians like it or not, the state budget is like a
black hole. The more money you throw in it, the more money it swallows, and
with decreasing efficiency.”
He believes that the only way to force a government to
reduce public spending is to give it less money to spend.
“For that reason, I truly believe that there is always room
for tax cuts,” he said.
The taxes that should be reduced are always a matter of
political taste but Ďurajka prefers less taxation of income and wealth and more
taxation of consumption.
“For me the choice would be to further reduce income taxes,
or more importantly social security contributions, especially the high burden
of payroll taxes paid by employers,” he said.
Jakubek does not foresee any tax cuts at this time. He
believes it is very important that Slovakia remains competitive.
“Slovakia has been competitive in the past and I believe
that we still have an attractive economy,” he said. ”We must remain vigilant to
ensure that we protect our competitive position. However, given the present
economic situation, I do not feel any immediate pressure to reduce taxes.”
The future of tax rates
Tax specialists do not see potential tax increases as a good
idea.
“Increasing taxes, now or after the general election, would
be a very bad idea,” said Ďurajka. “In order to catch up to the GDP per capita
level of western economies we need to stimulate our economy to grow faster than
those countries. And a lower tax burden is helping us to achieve this. There is
no such thing as an “unavoidable” increase in taxes. There is always an
alternative – reduction of, or more effective, public spending.”
According to Moger, it is important to look at the overall
tax burden, not just one isolated tax.
“Slovakia does not have the lowest burden of taxes and
payroll taxes in the EU,” she told The Slovak Spectator. “According to the
Paying Taxes study recently issued by the World Bank, Slovakia is ranked 115
out of 181 countries worldwide in terms of the total 2008 tax and social
security burden for a typical medium-sized manufacturing company. The main
reason for this is Slovakia’s high social security contribution rates. Within
the EU, the total tax burden for this hypothetical manufacturing company is higher
in Slovakia than in eight other countries, including the UK and the
Netherlands. All of these countries have lower social security contribution
rates than Slovakia.”
Moger believes that an increase in taxes is likely to be
detrimental for Slovakia. She stressed that many foreign investors in
particular have been wary of investing in the central and eastern European
region because of a perceived risk of significant adverse changes in taxation
and legal regulations that could follow any change in government.
“The fact that most of the changes to the Slovak tax system
in recent years have been favourable for investors, and that the coalition
elected in 2006 did not make any major changes to the tax reforms introduced in
2004, has meant that Slovakia is now seen as a fairly safe place in which to
invest,” she said. “Thus significantly increasing taxes in the near future
would make Slovakia much less attractive to potential new investors, as well as
increasing the likelihood of existing investors moving to lower tax
jurisdictions, either within the EU or elsewhere.
Tax experts at PricewaterhouseCoopers believe that a better
approach would be to focus on increasing compliance with existing tax laws, in
particular through taking aggressive measures to tackle the grey economy and to
ensure that all individuals and businesses that are required to pay tax are
registered and pay the correct amount.
Ďurana of INESS does
not want to assess taxes and social security contributions separately either
because he believes they are closely connected. He furthermore does not see the
low tax burden when compared with other EU countries as an argument for an
increase in taxes. According to Ďurana, discussion of tax increases should be
under consideration only after government expenditure is re-evaluated. He added
that this expenditure has increased by almost one-third during the last three
years while the rate of inflation was below 10 percent.
“If handling public
funds becomes more effective, this would lead to savings which would create
space to achieve a balanced state budget and reduce tax rates,” said Ďurana.
“Regarding the need to keep competitiveness, contributions burdening labour or
corporate taxes should be cut.”
Jakubek, as a general principle, said he is opposed to increases
in tax rates.
“I would much prefer to see strategies that increase tax
revenues through broadening our base for taxation by attracting more potential
taxpayers to Slovakia as well as strategies which focus on the effective
collection of taxes,” he said. “The big problem is that such solutions take
time to implement and we need to deal with an immediate issue. The real
challenge is to deal with the short-term gap without negative consequences on
our economy in the long term.”
The
Slovak Spectator, 5 Oct 2009, Jana Liptáková
