BRATISLAVA, January 3, (WEBNOVINY) — Increasing the tax burden, which is supposed to help improve the situation of public finances, is not an appropriate instrument for solving the present situation, says the conservative think tank the Institute of Economic and Social Studies INESS. According to the institute, increasing the taxes de facto legitimizes the increase in ineffective spending that took place in the past few years. “An appropriate reaction to this increase would be a more resolute reduction of public spending,” states the INESS analyst Radovan Durana in a recently published analysis. According to the institute, the increase of tax rates is unacceptable, as long as it is supposed to de facto pay for the wild increase in ineffective spending of the public sector in the past.
In 2009, Slovakia had a general government deficit of 7.9 percent of GDP. According to INESS, this deficit was mainly the result of expansionary spending policy, which resulted in the highest year-on-year rise of public spending in the entire EU. “The high growth in expenditures in the years 2008 and 2009 was not a result of adopted reforms or of systemic changes, which would tangibly improve the quality and extent of public services,” adds the institute. They say that in 2009, deficit spending became an EU standard: in 2008, eight countries had a budget surplus; in 2009, it was none. More than 16 EU members had a deficit higher than 5 percent of GDP.
The increase of Slovakia’s public spending, by 15 percent compared to the previous year, was according to INESS mostly a result of the expansive financial policy of the government led by Robert Fico. “The government simply increased financing of some sectors of the public system […] and wages of almost all public sector employees. However, increasing the volume of funding was not preceded by structural reforms, therefore the result is not increased added value and better services provided to taxpayers. The final deficit is an example of inability to adjust spending to the changed economic environment, foremost to the expected stagnation of tax revenue,” continues INESS.
SITA