Coalition agrees on consolidation of €2.7 Bn

The governing coalition agreed to pass a package of measures to consolidate €2.7 billion in public finances and thus squeeze down the next year's deficit to 4.7 percent of GDP, Prime Minister Robert Fico announced in the presence of other coalition partners at a press conference on Tuesday.

As part of the consolidation, VAT will increase to 23 percent, although VAT on basic foodstuffs is to be reduced to 5 percent and a tax on financial transactions for businesses is to be introduced as well as increased income taxes for businesses with profits exceeding a certain level.

In the Government's view, the consolidation is necessary because previous cabinets have left Slovakia's public finances in the worst state among all EU countries. "It's inevitable because we must be solid and responsible partners. We've joined the eurozone voluntarily and since we're part of it, we must respect certain rules," underlined Fico, adding that if the Government weren't to fix the public finances, borrowing options and Slovakia's international rankings would have worsened significantly.

Fico praised "unprecedented compromise" in the VAT regulation that he finds well-balanced and designed to lead to lower prices of foods. "We made a deal that as far as VAT goes, we're going to introduce the basic rate of 23 percent, with all remaining foods to be taxed at 19 percent rate and the staples, which we reduced to 10 percent VAT a few years ago, to go down to 5 percent rate," he claimed. The lowest 5-percent rate should apply also to medication, textbooks, rental housing and accommodation services in tourism.

The Prime Minister confirmed that the Government will modify parameters of the tax bonus and the so-called "parental pension", but, on the other hand, pensioners will receive a full 13th pension this year. "No one can say that we've made a decision to reduce the volume of money pensioners receive," he stressed.

Source: TASR