Reuters: Financial Services and Real Estate: UPDATE 1-Slovakia proposes special tax on utilities

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UPDATE 1-Slovakia proposes special tax on utilities May 29th 2012, 17:54 Tue May 29, 2012 1:54pm EDT * Tax would raise 100 mln euros * Targets energy, telecoms firms run by foreign investors * Government wants deficit below 3 pct of GDP in 2013 (Adds quotes, details) By Martin Santa BRATISLAVA, May 29 (Reuters) - The Slovak government will slap a special tax on utilities in regulated sectors to boost the euro zone country's budget, Prime Minister Robert Fico said on Tuesday. Fico said the tax would be applied in 2012 and 2013 to firms in energy, telecoms or postal sectors - which have heavy foreign ownership - and be set at 4.2 percent of annual profit, on top of regular corporate tax that will rise next year to 23 percent from 19 percent. "The sum we may gain may be around 100 million euros, which would be used for pro-growth activities," Fico told a news conference. Fico, whose centre-left Smer party won a landslide victory in March elections, has already proposed a higher s pecial tax on banks and an extraordinary one-off 50 million euro ($63 million) levy on the sector this year. The proposals need parliamentary approval, but that is expected to be a formality given that Smer holds a comfortable majority with 83 deputies in the 150-seat house. Slovakia has one of the lowest tax burdens in the euro zone, with a tax revenue ratio - compared with gross domestic product (GDP) - of 28.4 percent, below the OECD's 33.8 percent average. That is going to rise under Fico's rule. The country's main electricity producer, SE, is majority owned by Italy's Enel, the gas sector is dominated by a firm co-owned by Gaz de France and E.ON, and the telecoms sector includes Deutsche Telekom, France Telecom and Telefonica. Fico told a news conference the cabinet would also consider transferring some pension insurance payments now going to individual savings accounts into the budget. He said contributions to private funds may be cut to 5 or 6 percent from 9 percent, increasing the funding of current state-run pensions. The proposed measures to some extent resemble steps taken by neighbours Hungary and Poland who have tapped pension funds to improve the budget balance. Hungary has also slapped special taxes on selected industries. Slovakia's government needs to find up to 1.5 billion euros next year to slash the budget deficit below 3 percent of gross domestic product. Daria Zakharova, head of the IMF mission told reporters in Bratislava: "We understand that there are limited instruments to look at and that the key goal is to keep fiscal deficit at sustainable level." But she added: "We do believe the bank levy may discourage financial intermediation. This measure may need to be reconsidered or substituted by some other measure in our view." The country's banks, which reported a 34 percent jump in net profit to 674 million euros last year, have protested against Fico's plans, saying the extra levies would hurt growth. The banks include VUB Banka, a unit of Italy's Intesa Sanpaolo, Slovenska Sporitelna, of Austria's Erste Group Bank, Tatra Banka, of Austria's Raiffeisen Bank International, and CSOB, of Belgium's KBC. ($1 = 0.7977 euros) (Reporting by Martin Santa and Jan Lopatka; Editing by Ruth Pitchford) Link this Share this Digg this Email Reprints

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