Slovakia's new government wins vote of confidence in Parliament

Prime minister Robert Fico, photo: CTK

The days when Slovakia was viewed as Central Europe's boldest economic reformer and a close ally of the United States appear to be over. On Friday, Parliament approved the policy programme of the new government of Robert Fico - a platform that fundamentally changes the economic reforms started by the previous centre-right government. As Anca Dragu reports from Bratislava, it has been highly criticized for being too vague and lacking expertise:

Prime minister Robert Fico, photo: CTK
Fiscal policy has been the most controversial chapter:

"We will keep the 19 percent corporate tax. But we plan to introduce the so-called "millionaire tax" for people with above-standard incomes. At the same time the Government intends to introduce a tax on donations and gifts to third persons, while a second reduced VAT rate will be introduced for selected goods and services, to replace the current 19-percent flat rate", concluded prime minister Robert Fico who did not mention, however, any concrete rates for the new taxes.

The Minister of Finance, Jan Pociatek, couldn't offer any information about how such a millionaire tax would be applied. As to the amount of this tax, he didn't appear to have any idea.

"We haven't established the tax base limit from which it will be applied or how many people will be affected but we estimate that it could bring up to 65 million euro to the state budget. I think it should be applied to politicians too", said Pociatek.

Theoretically anybody who earns more than 1,300 euro per months can be asked to pay millionaire tax. This is a normal salary for a project manager in IT, a sales or marketing manager of a bigger company, not to mention accountants, and even private dentists. No wonder analysts have criticized this millionaire tax as a dirty attack against the successful, highly educated Slovaks. It makes a striking contrast with another statement from the same manifesto saying that a knowledge based society is a priority for Fico's government.

Minister of Finance Jan Pociatek, photo: CTK
"Such a tax will not help the social policies of this government, one jot. They simply show off in front of their electorate by trying to say that they are fighting against millionaires", said the political analyst Miroslav Kusy.

Other analysts have been critical to the idea of introducing a second VAT tax for medicines, foodstuff and books besides the current flat rate of 19 percent. They calculated that if a 5-percent VAT was introduced it would cause a 370 million euro loss in the budget. That's why analyst Juraj Kotian is curious to know how this government will be able to meet the criteria for euro adoption in 2009 when its manifesto is a long spending list.

"The pension reform costs 1.5 percent of GDP per year. It has been so far financed through incomes from privatizations. If the government stops privatizations, then it will have to issue more debt. The debt will reach 40 percent by the end of the election term."

The debate in Parliament around the manifesto ended well past midnight on Thursday. The former Minister of Labour, Iveta Radicova, who is a sociologist by profession, has been the loudest critic of the social policy proposed by Fico's government.

"You can't change the structure of income groups in relation to an average level of income, for goodness sake, because it will simply mean to change the Gauss's bell curve, a basic law of mathematics and statistics. Gaussian distribution will never apply to this situation simply because the minimum income is fixed and the maximum is open, said Radicova who went on criticizing the social policy that doesn't take into account demographic evolutions in the country."

The government put counter arguments. Interior Minister Robert Kalinak, still a bachelor at the age of 35, promised he would personally help to solve Slovakia's demographic problem. Some MPs found such a bawdy remark funny and had a good laugh, but it didn't help at all in answering the questions about the real expertise of Fico's ministries.