slovakia Faces Tough Choices: Higher Taxes onโ Vice,โฃ property, and Potential VAT Hikes Loom
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Bratislava, โคSlovakia -โ The Slovakโ government, led by Prime Ministerโ Robertโ fico, is โฃgrappling wiht aโฃ significant budget shortfall and is increasingly โleaning towards higher taxesโ onโค vices like gambling andโค sweetened foods,โ and also increased property taxes, too bridge the gap. Originally aiming to reduce the public finance deficit toโค below three percent of GDP by the end of its term, the government has now pushed that target back to 2028, citing growing geopolitical pressures.
Finance Minister Ladislav Kamenickรฝ is under pressure to identify an additional two billion euros inโค revenue for the 2024 budget,โข andโฃ is โฃscheduled to presentโค a draft to the โขgovernment on August 20th. This โขurgency is driven by the upcoming expiration of a two-year exception to the constitutional debt brake, which requires a balanced budgetโฃ if public debt becomes too high. Failure toโ approveโ the โคbudget byโ November โ21st could trigger a vote of confidenceโ in โthe government and necessitate aโค balanced budget nonetheless.However, consensus within โขthe ruling coalition remainsโ elusive. โคFollowing โขa recent meeting, Prime Minister Fico stated that the โcoalition will onlyโค publicly announceโ consolidation measuresโข once a โfull agreement isโฃ reached, with further negotiations โscheduledโฃ for Wednesdayโ evening.
What tax Increases Are Being Considered?
Here’s a breakdown ofโ the potential tax increases currentlyโ under discussion:
VAT Adjustments: The government previously increased theโ standard VAT rate to 23%. โคFurther increases are being considered for reduced rates โขapplied to food, beverages, and othre essential goods. Specifically,higher VAT could be โapplied to sweetened foods,salty snacks,and other items deemed less essential.
Second Pillar pension Reform: โฃ Labor Minister โคErik Tomรกลก is โproposing allowing individuals to transfer funds from the second pillar of the pension system โback to the state-run first pillar. This move, while potentially reducing the long-term burden on the pension system,โฃ would provide a short-term boost to state revenue. Real Estate Tax Hikes: A โkey โฃcomponent of the consolidation plan โขinvolves increasing taxes on real estate, particularlyโ non-residential properties and investment apartments. โMunicipalities are expected to play a role inโ implementing these increases, potentiallyโ doubling โor tripling taxes on owners of multiple properties.
“Sin” Taxes: โ The government is also looking at increasing taxes on gamblingโ and tobacco, targetingโค what are considered “negative externalities.” A one percentage point โincrease in the gambling โขlevy โคto 28% is under consideration.
Potential Retail Levy: Discussions are underway regardingโฃ a special levy on large retail chains, similar to those already in place for regulated sectors.
Increased Progressivity of Income Tax: While mentioned in the coalition agreement, details on increasing theโ progressivity of income tax – meaning higher earners pay a โคlarger percentage – remain scarce.
Impact and Concerns
These proposed measuresโข are likely to face opposition. Criticsโ argue that increasing VAT could disproportionately โขimpact โคlower-income households, while higherโ propertyโค taxesโฃ could stifle investment.The proposed changes โtoโค the secondโค pillar pension system have also raised concerns about the long-term security of retirement โsavings.
Theโ coming weeks will โคbe crucial as the Slovak government attempts to navigate these tough โขfinancial challenges โขand forge a consensus on a โฃbudget that can address the deficit while minimizing the impact onโข itsโ citizens. โ
Keywords: Slovakia, Budget, Taxes, VAT, Property โTax, Gambling Tax,โ Robert Fico, Ladislav Kamenickรฝ, Deficit, Debt โBrake, Consolidation, Pension Reform, Second Pillar, Economy, Finance.