Is the Start-Up Strategy of the Slovak Government a Bad Joke?

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Is there a difference between a starting entrepreneur and a disabled person? Yes, there is, and it’s a big one. A disabled person has much fewer options if he or she wants to get a government aid compared to a starting entrepreneur. I remembered this joke when I was reading one of the government strategies. But the joke may soon become a reality if the government decides to implement it. And that’s not funny at all.

We all know that if an entrepreneur wants to abide by the law and make an honest business, it is not a bed of roses. However, there are still many entrepreneurs who choose this way despite (and not thanks to) the current bad business environment in Slovakia. The decision makers are aware of such a state of affairs, and so they offer many solutions (in theory). Nonetheless, all of those proposals seem somewhat problematic. Such is also the latest example: the starting entrepreneur support strategy proposed by the Ministry of Finance.

Let’s first take a look at the bright side. Authors of the strategy are definitely aware of the complexity of the problem of business environment. Therefore, they understand that it is necessary to cover the solutions by a lot of ministries, private and public agents – for example, all levels of education, especially secondary education as the base for entrepreneurs’ education, and university education as the base for research and development and real life connection). Another positive aspect is the effort to create tools for the new entrepreneurs or people who want to start business – in other words, to build support for start-ups, what translates into an assistance to beginning entrepreneurs with an innovative products and services. Support of institutional framework, National Business Agency, a network of investors focusing on new start-ups and their future investors can really make the first business steps easy.

On the other hand, misguided views how to create suitable business conditions is the fundamental problem of the strategy. A noble goal – building a controlled environment without redundant barriers – takes the form of statutory exceptions from general rules which impact all of the other entrepreneurs in the country. Have we not introduced a minimum tax for companies? Well, yes we did. And we are aware that it takes the liquidity away for no reason; therefore, we’ll exempt start-ups from it for three years. We know that required amount of collateral from €1.000 to €500.000 , which is paid by voluntary VAT payers, withholds financial means up to 12 months. Moreover, the attitude to give the start-ups a protection from the outside world is not enough. Apart from these special terms, the government is preparing also start-up subsidies. The most silly of them is providing a cost of living grant for students who have some idea for a business but not yet a company. Subsidizing the development of entrepreneurial spirit by providing the living expenses while the students are at a stage of contemplation is the most controversial proposal of the year.

The government should stick only to creating suitable business conditions, and not to extend its role to building artificial conditions and spoon-feeding future entrepreneurs. The main problem of the strategy is that it substantially extends the role of the state. If government agrees on implementing the strategy, start-upers would be degraded into the position of benefit recipients. Moreover, government, while trying to solve problems of start-ups, will trigger many new issues. Especially a long-lasting problem of the increasing difference between entrepreneurs’ conditions, as start-upers would be offered disproportionately better conditions compared to other (starting or long-established) entrepreneurs.

Translation: Milan Majtán and Martin Reguli

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