Slovak PM denounces ‘fashion’ of not paying taxes

Prime Minister Robert Fico said he regrets that it has become a “fashion” in Slovakia for companies not to pay their taxes. EURACTIV.sk reports. 

Speaking at a public event in Bratislava, Fico said that government officials are routinely given invalid tax receipts, and that on one occasion construction workers offered their services to the prime minister without an invoice in order to avoid paying VAT.

“If they dare do it to the minister of finance or they have no problem to offer such a thing to the prime minister, what is happening in other walks of life?” Fico said.

The prime minister made these comments at the 8th Regional Tax Conference on The Future of Tax Collection in CEE held 5 March and organised by the American Chamber of Commerce in the Slovak Republic.

Fico stressed that his government will achieve the 3% deficit target this year, but admitted that this year tax revenues in Slovakia was slightly behind last year especially due to the weak collection of VAT.  He added that tax collection and its effectiveness is a vital issue not only in Slovakia but also in the whole European Union.

A region 'made for VAT fraud'

Representatives of Slovak, Czech and Polish state administrations acknowledged that the biggest problem in the region was VAT fraud.

Ji?í Žežulka, director for risk management in at the Czech Republic's tax authority, stressed that quick reaction from the authorities was key to addressing the problem.

“These are not legitimate businesses standing against us, but organised crime groups specialising in siphoning tax. These people do not wait for the regular tax inspector to come, collect tax evidence and check it. These entities exist 14 days or a month, and their ultimate goal is to syphon VAT and disappear,” Žežulka said.

VAT fraud is a problem for the whole region and experts say Slovakia is, after Greece, the second worst-ranking country for tax evasion in the EU.

As a part of the European Semester of economic policy coordination, all countries of the Visegrád group – Poland, the Czech Republic, Slovakia and Hungary – were encouraged to strengthen their tax collection systems (see background).

František Imrecze, president of the Slovak Financial Administration, said more than 70% of identified frauds took place with the country’s neighbours. He said Slovakia had already adopted its national action plan for tax collection, which includes 50 measures divided into three stages. The first package primarily targets risk assessment of tax payers for VAT registration. 

In Poland, a reform of the tax administration system has been launched in response to the Country-Specific Recommendations issued by the European Commission, said Cezary Krysiak, director of Tax Policy Department at the Polish Ministry of Finance.

Gaëtan Nicodeme, an official at the European Commission's Taxation and Customs Union directorate, recalled the Commission’s general recommendation to the member states to shift the tax burden from areas hindering growth to excise taxes, environmental taxes and property taxes.

Countries are also invited to learn from each other’s best practices. Nicodeme mentioned several best practices published in the Report on Tax reforms in EU member states prepared by the European Commission.

Public anger needs targets

Peter Chrenko, chair of the Tax Committee at the American Chamber of Commerce in the Czech Republic, stressed that most US companies support tax compliance and want to pay their fair contribution.

Firms and governments are in fact on the same boat, he stressed. If governments lose revenue, they raise taxes and honest companies are unable to compete with tax evaders and fraudsters, Chrenko argued.

As pointed out by Barbara Guzina, chair of Tax Committee in AmCham Slovenia, new “role models” have emerged among companies. “The main issue is how to combine efficient tax collection with the competitive tax environment. We have to improve tax collection in order to decrease taxation as a second step,” she explained.

The issue of multinational tax avoidance has risen to the top of the political agenda, especially in Great Britain after revelations that companies such Starbucks, Apple, Google or Amazon were using complex inter-company transaction to cut their tax bills.

Profit-shifting and aggressive tax planning came under scrutiny by the Organisation for Economic Co-operation and Development and its BEPS Initiative.

Background

The European Commission estimates that €1 trillion is lost every year to the tax evasion and tax fraud and considers it a scandalous loss of much-needed revenues in the times when governments are under pressure of fiscal consolidation that affects citizens.

To tackle this issue, the Commission presented Action plan against tax fraud and tax evasion containing 34 measures in December 2012, one of them being the quick reaction mechanism against VAT fraud.