NGOs angered by Slovak Finance Ministry's tax plan

Many non-governmental organisations are heavily dependent on donations from the corporate sector, and in Slovakia they put a lot of energy into lobbying for funding. But now Slovak NGOs expect to see a big drop in corporate income. The Finance Ministry plans to abolish a tax provision allowing firms to give some of what they owe in taxes to non-profit organisations. Radio Slovakia International's Anca Dragu reports:

Photo: European Commission

Since January 1st 2004, companies and individuals officially registered as tax payers in Slovakia have been able to donate 2 percent of what they owe in taxes to non-profit organisations of their choice, including schools, kindergartens and local theatres. That had represented an increase on the 1 percent they were allowed to give away in the fiscal year 2002-2003.

This year, Slovakia's NGOs acquired around 18 million euro from the 2 percent given away by companies under the current system. But now the Finance Ministry plans to abolish this: it argues that the law allowing such donations is leads to a lot of administration work, brings a low yield and is often abused by NGOs.

"If the state cancels the possibility to direct 2 percent of the corporate-entity tax, Slovakia will turn the clock back 20 years. My organization has been taking over the state's role in cancer prevention for many years and I cannot imagine continuing this work without this income," said Eva Siracka, director of the League Against Cancer, the non-governmental organisation that tops the list of receivers in terms of amount and number of donations made. Last year it got almost 400,000 euro via the 2-percent system."

Even former labour minister Iveta Radicova has joined the protesters; she emphasizes that the NGO sector is an important element of employment. The third sector, in which she has been involved since 1992, had already been found itself in a more complicated situation following Slovakia's accession to the EU two years ago. Foreign sponsors and donors, who provided significant funds for NGOs until that time, left Slovakia. Legal expert Peter Handiak, one of the authors of the current legislation allowing legal entities to assign 2 percent of their taxes to an NGO of their choice, said that the non-profit sector realizes that the current mechanism is far from perfect and that space still exists for improvement.

Photo: European Commission

"The Ministry of Finance proposal aims to put control of the NGOs in the hands of the state, because in losing a relatively important source of finance, many of these organizations will have to go through the bureaucratic process of applying for grants from programmes managed by the state. The line between governmental and non-governmental will become thinner and thinner," concluded Handiak.

In an apparent effort to reach a compromise, the Finance Ministry has said it will hold discussions with representatives of NGOs before the amendments to fiscal legislation are introduced in Parliament.