BRATISLAVA, September 1, (WEBNOVINY) — The final form of an ambitious package of fiscal consolidation for next year amounting to EUR 1.7 billion remains elusive even after Tuesday’s negotiations of leaders of four center-right governing coalition parties. The question remains open of a possible increase in the value-added tax rate, which was mentioned as one of the alternatives. „This is a question which I cannot answer today, because today we have alternatives and proposals and until we thoroughly contemplate and calculate them, I will not be giving an answer. Next week, I will respond,“ said Prime Minister Iveta Radicova after the Coalition Council meeting on Tuesday night. The government’s consolidation package should get clearer contours next week, when, according to the Prime Minister, working groups will meet again for more talks and the Coalition Council will then meet to arrive at a definite decision.
The Prime Minister announced that what it is certain at this point is that spending cuts in next year’s consolidation would amount to at least EUR 900 million. „This [reduced] spending is from various areas. Whether the announced 10-percent saving on current expenditures and salaries, public procurement and pruning of non-priority spending on regional development, which we can refer by the working title of wasted funds,“ she said.
Increased revenues should contribute to the consolidation package by the maximum amount of EUR 800 million. Measures on the revenue side, however, have not been completed even after Tuesday’s negotiations of the coalition leaders. The Prime Minister has indicated, as some possible steps increasing excise taxes on alcohol and cigarettes, or elimination of exemptions in the tax system. „There is a general agreement on the elimination of tax exemptions, but the agreement is not yet ready on excise taxes. We are still discussing an excise tax on wine,“ she said and confirmed that existing deductible items from the tax base for the [non-working] husband or wife will not be cancelled, but, certainly cancelled will be tax benefits for retirement savings in the third pension pillar.
A final agreement has also not been achieved in the question of payroll contributions. According Radicova, the coalition is preparing a reform of the system of payroll contributions, resulting in a reduction of the current burden. This cannot be done until be beginning of January of next year and therefore the coalition is looking for temporary solutions. „I will inform about these solutions next Monday, but it needs to be discussed again in working groups and the Coalition Council,“ she said. Nevertheless, she repeated her commitment that the government will not introduce additional burdens on income from labor. „Increasing the burden of payroll contributions is out of the question,“ she said.
The Coalition Council already discussed the consolidation measures last week. At that time, the leaders of four ruling parties only discussed the proposals raised by Finance Minister Ivan Miklos and Labor Minister Josef Mihal. Last week’s meeting ended relatively quickly. Prime Minister Radicova promised that in raising revenue, the government would seek solutions that would pose the least possible burden on labor income. Instead, consumption and income from capital would be burdened more. The initial proposals particularly concerned income of the population.
Consolidation measures on the side of revenues and expenditures should ensure a sufficiently strong consolidation of public finances so that the general government deficit is reduced by EUR 1.7 billion. The goal, which the new government set out for itself and incorporated it as a top priority in its program statement is to reduce the deficit to 3 percent of GDP in 2013. According to latest estimates of the Ministry of Finance, the deficit will increase to 7.8 percent of GDP this year.
SITA