NBS continues rate slashing
The National Bank of Slovakia (NBS) has reduced the basic rate, from which interest in commercial banks is also derived, by 0,25 percent points. Since a similar reduction was made at the end of March, rates have therefore diminished by 0,5 points in the course of one month. Even though some banks maintain that hey have been progressively lowering interest, space has been opened for the further continuation of this trend.
The rate slash has influence on monetary and bond funds held in crowns and, through the crown exchange rate, also on all funds in foreign currencies. "We are not expecting substantial influence on domestic bond and monetary funds, since this 0,5 point shift in the first half-year was foreseen", said portfolio manager, Katarína Antoničová. April 25
Fico's tax won't help state
Foreign company holders will not "give back" to Robert Fico the money which they receive in the form of dividends, no matter how much he would like to see at least a part of this in the state's coffers.
Firms paid 15% tax on dividends until 2004, but reintroducing their taxation needn't bring great benefit to the state. Although tens of billions of crowns leave Slovakia every year, foreign companies operating here have many ways to legally sidestep the potential payment of taxes. For instance, they could found a daughter company in another country which would become the owner of the shares in the Slovak company, and then pay lower, or even no, taxes according to the local laws. Firms may also artificially inflate expenses so that their profits fall. One way or the other, the state would not earn much from the possible taxing of distributed profit. Slovak Savings Bank (Slovenská sporiteľna) analysts estimate that the income from such a tax would bring the state only one billion crowns.
If the state were to start taxing dividends, this would signal a return to double taxation. At present, taxes are paid on profits. The reintroduction of taxes on dividends would significantly worsen the business environment. We would be principally opposed if it increased the financial burden on the business sphere", commented Ján Oravec of the Entrepreneurs Association of Slovakia. According to HN information however, nothing along these lines is being prepared. On the other hand, Premier Robert Fico has repeated in recent days that decisions on taxation can also be adopted according to political criteria. April 26
English translation by Kevin Slavin