Slovakian Coalition May Collapse Over Tax Reduction Plan

by Ulrika Lomas, Tax-News.com, Brussels

29 August 2001

Following last week's row over tax rates between Slovak Finance Minister Brigita Schmoegnerova and Deputy Prime Minister for the Economy Ivan Miklos, Ms Schmoegnerova promised over the weekend to resign from her post if the amendments to the tax bills originated by her Ministry are approved in the parliament.

A week ago, the amendments were pushed through the Slovak cabinet by the votes of Mr Miklos's right-wing party members, cutting the rate of corporation tax cut to 26% immediately, with further 2% reductions each year until the rate finally reaches 18% in 2006. The top rate of personal income tax, set to be reduced from 42% to 40% in the Finance Ministry proposal, comes down to 38% under the Government's revised plan.

Minority coalition partners the Party of the Democratic Left (SDL), who were outvoted in the cabinet, held a national committee session on Sunday 26 August after which Ms Schmoegnerova told the TASR news agency that her possible resignation is considered as her party's response if no major amendments are made to the tax bills; the SDL is basically opposed to their content as proposed by the cabinet. In this connection, SDL Chairman Jozef Migas said his party takes the bill as a direct attack against the cohesion of the governing coalition and an attempt to discharge the leftist SDL from the coalition.

The coalition was already looking rocky after the ethnic Hungarian party in the government gave its partners a month to pass laws giving more powers to local authorities. Otherwise it said it would leave the Cabinet. The decision came at a party congress at which some observers had said it might decide to pull out of the government at once. But the party said it was giving its partners a last chance.

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