Gregor: Government Must Tidy Up on Expenditures Side of State Budget

Klub 500's Gregor on public finances' consolidation (photo by TASR)

Bratislava, August 25 (TASR) – The Government should also focus on consolidating public finances on the expenditures side rather than solely striving to increase incomes through elevating taxes and compulsory levies for businessmen, said Klub 500 executive director Tibor Gregor in an interview for TABLET.TV on Thursday.

[Klub 500 is an association of companies with more than 500 employees. – ed. note]
Businessmen chiefly dislike the introduction of a tax on dividends. According to Gregor, this won’t only hit businessmen, but others as well.

“At a time when the state has collected €1.3 billion extra in taxes, it wants an additional €400 million from entrepreneurs. This is unacceptable. This year it wants an additional €300 million. The state shouldn’t act like this, it must act like a clever manager and take care of those who are filling state coffers,” said Gregor.

In its first state budget draft the Government has set the goal of achieving a balanced state budget in 2019. However, it’s striving to meet the target chiefly through increasing incomes, while forgetting about reducing expenditures. “This system isn’t sustainable. If the Government strives to rescue the state budget through higher incomes in the future, it will fail to meet even the originally planned incomes. Businessmen will accommodate themselves to this. We have auditor companies, we have laws under which entrepreneurs can move their domiciles. They don’t have to have tax domicile in Slovakia, other countries are available. This is the road to hell,” warned Gregor, adding that Slovakia definitely won’t achieve a balanced budget in this way.

“The Government must tidy up on the expenditures side of the state budget,” said Gregor, providing the example of local authorities. “Over the past 11 years the Government has transferred €26 billion to municipalities through income tax on private individuals, while municipalities’ costs were €24 billion. An amount of over €2 billion has been left to municipalities. This is one of the areas that the state should tidy up,” stated Gregor, adding that the education and health-care sectors require changes as well.

According to Gregor, the introduction of a dividend tax is unacceptable for entrepreneurs. The tax and levy burden in Slovakia is one of the highest in the European Union. This tax won’t only hit businessmen. “Small shareholders from voucher privatisations will pay it as well, and the law also applies to shares in mutual funds and to partners in landowners associations; not only private individuals, but also corporate entities. We’re talking about a high number of Slovak citizens who will pay dividend tax,” added Gregor.

If a dividend tax is introduced, Klub 500 will consider contesting the law at the Constitutional Court, partly due to its proposed retroactive effect.