Eustream rules among biggest taxpayers, again (The Slovak Spectator)

 Radovan Ďurana komentoval nezodpovednú finančnú politiku vlády pre The Slovak Spectator 24.10.2016

 Which entrepreneurs pay the most corporate income taxes in Slovakia? Not surprisingly, mainly large and well-known companies with significant impact on the economy are among the top tax payers.

The ranking of the largest payers of corporate income tax in Slovakia in 2015 was released by FinStat, a website that analyses the data of companies operating in Slovakia. While the top places belong to companies focusing on energy and mining industries, finance, transport and logistics, tax experts point out that state-regulated companies and the vital automotive industry also account for a considerable amount.

“IT company Eset, a Slovak startup which operates worldwide with headquarters also in Slovakia, achieved a special place," Silvia Hallová, tax partner at IB Grant Thornton Consulting, told The Slovak Spectator.
FinStat compiles the ranking of payable taxes on the basis of the data which companies have sent to the Register of Financial Statements. Analysts based the 2015 calculations on the data of more than 180,000 financial statements, or about 90 percent of companies, the Denník N daily reported.

Strong domination of Eustream
The largest payer of income tax is still the natural gas transport company Eustream with more than €151 million in taxes paid to the state in 2015. While a 51 percent stake in the company falls under state ownership, Czech company Energetický a Průmyslový Holding (EPH) owns the remaining 49 percent of shares and controls the company via subsidiary Slovak Gas Holding (SGH).

The gas giant paid more than Slovenská Sporiteľňa bank (more than €66 million), automotive companies Kia Motors Slovakia (about €63 million) and Volkswagen Slovakia (about €52 million) and Všeobecná Úverová Banka (more than €45 million).

Other companies in the ranking include tyre producer Continental Matador Rubber, oil refinery Slovnaft, gas distribution company SPP Distribúcia, power producer Slovenské Elektrárne, Tatra Banka bank, insurer Allianz - Slovenská Poisťovňa and IT and telecom companies Slovak Telekom, Samsung and Eset, said FinStat analyst Jaroslava Šepeľová.

State ranking
Meanwhile, the state-owned Financial Administration (FS) collects its own tax collection data. However, instead of specific information about the largest taxpayers, the office provided The Slovak Spectator with only the ranking of industries, classified by statistical SK-NACE codes, and aggregate numbers.
In 2015, the most taxes came to the state budget from the automotive sector, pipeline gas transport, other financial intermediaries, as well as wireless telecommunications, production and maintenance of tyres and other financial services. The ranking was similar in 2014, but it included the sectors of non-life insurance and electricity transmission, FS spokeswoman Patrícia Macíková said.

Tax collection increases
Based on the FinStat methodology, payable taxes grew by more than 30 percent between 2013 and 2014, and by 11.7 percent between 2014 and 2015, according to Šepeľová. While in 2014, the state budget collected €2.41 billion in payable taxes, in 2015, total tax revenue jumped to €2.69 billion.

“Regarding the top 20 companies in the ranking of the largest payers, there were only shifts of about two-three places from 2014 to 2015," Šepeľová told The Slovak Spectator, adding that the industry structure did not change very much.
Macíková pointed out that the 30 largest tax payers paid €962.4 million of corporate income tax, which was 36.5 percent of all income tax revenue. In 2014, these companies paid €811 million, or 41.6 percent of all state tax revenue, she said.
“The highest annual increase in payments for corporate income tax were recorded by entities in the sectors pipeline gas transport, other financial intermediaries and production of motor vehicles," Macíková told The Slovak Spectator.

Legislative adjustments help
Behind the positive impact on year-on-year increase of tax revenues, FS cites the more robust economy and legislative changes including adjustments of depreciation of tangible property, tax licences, shortening the period of redemption of tax losses, application of the transfer pricing rules to domestic dependent persons, low capitalisation rules and cut-off creation of reserves as a tax expenditure on selected types of services.
Other significant measures include the creation of adjusting item entries only for anti-lapsed claims at banks and insurance companies, as well as recognition of discarded goods as tax expenditures, Macíková said.
Hallová believes that the state found inspiration in the FinStat ranking when it lifted the special levy on businesses in the regulated sectors, thereby it got information about how to raise more taxes for the budget.

Unclear impact of tax holidays
In addition to changes in the law, the ranking responds to the status of the companies' operating results, successes in the highlighted year, evaluated tax base and paid taxes, said Šepeľová.
“Of course, if a company utilises tax holidays or tax relief, it pays fewer taxes," Šepeľová said.
In contrast, Hallová does not believe that tax holidays and tax relief have a significant impact on the top places of the ranking as such processes are unlikely to be in energy, banking and insurance sectors, and in the automotive sector they were exhausted long ago.

Changes in numbers come
Experts do not expect significant changes in the ranking, which should feature similar companies in coming years. The ranking may reveal the influence of changes in the world economy development which could have an impact, for example, in the automotive sector, Hallová said.
However, a new forecast of the Institute for Financial Policy (IFP) shows that legal and natural persons in 2016 pay on all taxes by about €400 million (0.5 percent of GDP) more than previous data suggested, also thanks to the growth of companies' profitability in the first half of the year by 19 percent y-o-y. The state revenue estimates for 2016 have gradually improved by €2.73 billion since November 2013, Denník N wrote.
“If the government used the whole unplanned growth of tax revenue to cut down the budget deficit we would have had a budget surplus this year," said Radovan Ďurana of the Institute for Economic and Social Studies (INESS) think tank, as quoted by Denník N.

Tax licences remain
The forecast does not count on abolition of tax licences even though this measure was included in previous prognoses, according to the Pravda daily. While the Finance Ministry warns that the state budget will lose €72 million if the government abolishes tax licences, the Budgetary Responsibility Council (RRZ) talks about €112 million.
Analysts justify removal of the measure from the forecast by saying that in the approved law on income tax it did not appear, despite the fact that MPs of the ruling parties Slovak National Party (SNS) and Most-Híd have already publicly announced that the coalition agreed on submitting a proposal even within the current amendment on the law, the Sme daily reported.
Slovakia introduced tax licences as the minimum amount of corporate income tax along the lines of neighbouring Austria in 2014. Immediately after introduction, the measure triggered a wave of criticism due to the obligation to pay the licence fee even if companies show no income.
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Peter Adamovský
The Slovak Spectator, 24.10.2016