BRATISLAVA, October 18, (WEBNOVINY) — The Slovak Banking Association (SBA) announced that a 0.4-percent bank levy on some liabilities [corporate deposits — SITA note] proposed by the Finance Ministry would jeopardize stability of the banking sector and may increase prices of products and services. President of the Slovak Banking Association and Tatra Banka CEO Igor Vida specified that all transaction costs shifted by the state onto the shoulders of the private sector will ultimately be reflected in higher prices. Banks call it hidden taxation of their clients. The association has suggested that it be the National Bank of Slovakia that will set the levy rate, following consultations with the Finance Ministry. Banks want the financial situation outlook to be taken into account, as well.
The banking sector transferred over EUR 250 million in direct and indirect taxes to the state budget last year. Banks pay VAT and based on Vida’s estimate, direct some EUR 100 million in this tax at the state coffers. “Our earnings are high but we also pay high taxes,” Vida argues, adding that VAT is a much fairer instrument because it reflects real consumption. The Cabinet is planning to hit the selected sector just because it reportedly generates excessive profits. Corporate banks which do not provide retail services at all will be affected even more. “A VAT rate increase would definitely be a much fairer solution,” he noted.
Vida predicts that banks may resort to other austerity measures on the side of costs. The levy may endanger jobs in the sector with some 19,000 employees. Banks have warned that some of them may not be able to generate sufficient profits and thus, enough capital, which will be necessary particularly in case of economic downturn. The sector’s stability may also be exposed to risks when corporations transfer their deposits to financial institutions in countries that have not yet launched a bank levy or where its rate is profoundly lower.
SITA