BRATISLAVA: Slovakia's new left-of-centre government unveiled plans Friday to consolidate public finances by scrapping a business-friendly flat tax in favour of higher rates for the rich.
Amid corruption scandals which torpedoed the right-wing, the Smer social democrats of Prime Minister Robert Fico
won March elections by a landslide on promises of improving social welfare, while still keeping spending tight.
"The government refuses to see higher consumption taxes as the only measure to raise the budget revenue," the Fico government said in its Friday policy statement which was short on details.
"We will introduce progressive taxes on the above-standard income of individuals and corporations," it said.
Introduced in 2004, Slovakia's 19-percent flat tax is widely regarded as having fuelled the economic success of the ex-communist state by attracting foreign investment, primarily in the auto and electronics sectors
Fico had long vowed to eliminate the 19-percent flat tax on personal income
, essentially by adding a 25 percent rate for those who earn more than 33,000 euros ($43,600) a year.
He has also floated the idea of imposing a 22 percent tax on lucrative companies, including monopolies, banks and telecoms.
The Smer also supports introducing a tax on financial transactions within the eurozone.
The Fico administration insisted Friday the new tax measures would not affect spending, which would stay in line with EU limits.
"The key goal is to trim the public finance deficit
under 3.0 percent of GDP in 2013," the Friday policy statement said.
"The government will focus on measures that won't hinder economic growth
and won't have an excessive impact on the most vulnerable people," it added.
Vladimir Vano, chief analyst at the Volksbank, told AFP that "the key message of the policy statement is a repeated commitment to fiscal consolidation."
"Scrapping of the flat tax has a more declaratory than real effect - the corporations will be able to find a way to avoid paying higher taxes," the analyst said.
Fico's Smer social democrats party command 83 seats in the 150-member parliament, the first-ever absolute majority in post-communist Slovak government.
He faces a formal confidence vote next Wednesday.
Fico, who ushered Slovakia into the eurozone
in 2009 during his first stint as premier in 2006-2010, also pledged to be a "responsible and constructive partner within the eurozone."
Slovakia, a 2004 EU entrant, is striving to trim its public finance deficit to below the EU-mandated ceiling of three percent of gross domestic product in 2013 after an expected 4.6 percent this year.
Growth this year is forecast to top the eurozone at 2.3 percent after 3.3 percent in 2011, but Slovakia's export-driven economy
makes it vulnerable to any wider slump in the region, particularly Germany.