Slovakia’s new government has finally succumbed to the Sweet Tax Temptation, as we called it in our last publication. The Ministry of Finance has published a preliminary announcement describing its intention to introduce the tax. You read that right; it is not the Ministry of Health that is in charge of the health of the population and the sustainability of health spending.
The need to consolidate public budgets is perhaps already evident, even to those political parties that have long perceived resources as limitless and freely available. Investors worldwide eagerly await opportunities to lend to debt-ridden Slovakia. Consolidation plans are beginning to emerge, the Financial Policy Institute at the Ministry of Finance has published the impact of austerity and tax measures on GDP.
Family policy has become a universal content of election programs of all parties. In this area, the parties unanimously offer increases in public spending, regardless of the added value of the increase.
In December 2019, the European Commission presented a set of policies and targets known as the ‘European Green Deal’. Already in January 2020, the European Parliament voted in favor of adopting the deal.
The current energy crisis is a huge lesson for the Green Deal. Ambitious goals, boldly planned in a period of cheap and available energy, are much more difficult and expensive to achieve in a period of scarcity and uncertainty.
There are a number of ways to reduce greenhouse gas emissions. We will use the example of photovoltaic subsidies in Slovakia to show how not to do it.
Last July, the European Commission presented a proposal for a directive aimed at reforming the taxation of energy products and electricity. This proposal is part of the European Union’s (EU) efforts to reduce emissions and air pollution.
According to a representative survey commissioned by the economic think-tank INESS, very few Slovaks know what employer levies are paid today, or what their actual amount is.
People will stick with cigarettes, which, although more harmful than the alternative, will bring more taxes into the state coffers. After three years, tobacco tax increases are back on the table. In English, it is known as the “sin tax”. Similar to the tax on alcohol or beer. The public perceives these taxes as a way for consumers of addictive substances to ‘pay’ for their sins. The truth is that smokers pay a lot.
Some respected economists identified the issue of consolidation in public budget already in 2022 as a third-order problem. From an analytical point of view, he is, of course, right. A one-year deficit of 10% of GDP is nothing compared to a permanent two to five per cent deficit in the pension system with a declining workforce.
