Friday, June 1, 2012

Lenka Preisingerová: Additional taxation of companies requires specification

According to new proposal on additional taxation of regulated entities, it is not clear on whom the government will impose an extra tax. However, it is evident that it will be only temporarily.

The Minister of Finance of the Slovak Republic Mr. Peter Kažimír presented a proposal that will impose an extra tax on some energy companies. The estimated additional tax will be linked to regulated entities. In wording of proposal regulated entity states for “corporate body, which is authorized to act in the field of energy under a permit issued by the Regulatory Office for Network Industries.”

Interpretation of this proposal is not clear. The extra tax would have to pay each energy company that had received the license from the Regulatory Office and simultaneously makes its annual profit at least EUR 3 million, while at least 50 % of total revenues come from regulated activities. But the question is whether such interpretation is correct. On the other hand, it would mean that each company selling its goods and services for regulated price would have to pay an extra tax. Generally speaking, a regulated activity can be also the operation of power plant, although the producer sells electricity for unregulated, market price. More similar examples could be found.

There is also another question: Is the extra taxation of the regulated entities fair? The current Slovak government is ideologically committed to the social democracy, so it is oriented politically left. In addition, it has to deal with the issue of public money and state budget, which is the issue in the whole Eurozone, not only in Slovakia. In comparison with the other European countries, companies in Slovakia enjoy one of the lowest tax burdens in general. The extra 4,2 % tax will change almost nothing.

Apart from ideological debates, the rules of the tax system must be respected by each company. Regulated entities may theoretically initiate arbitration court, or they will accept an additional tax and take it as a “necessary evil”.

In all cases, companies will have to wait for specification of the law proposal. Currently, only one aspect is certain; the extra tax will be applied only for limited period.

Written by Ms Lenka Preisingerova, editor at

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