Challenges of the Current Tax-sharing System in Slovakia

Abstract

The sharing of state tax revenues with local self-governments is a common practice in most countries, and the Slovak Republic is no exception. However, these systems vary significantly and while some countries apply a wider tax mix, others use just a single shared-tax system. The latter is the case in Slovakia. The paper evaluates, therefore, the appropriateness of using the current single tax (PIT), in terms of income stability, budget foreseeability and income sufficiency, for this purpose, and afterwards, it takes a look at the appropriateness of the single shared-tax system at large. Based on the data, PIT seems to be a smart choice for the Slovak Republic, as it is both income stable and budgetary foreseeable. From the income-sufficiency point of view, PIT is a medium voluminous tax, compared to other state taxes. However, from the local governments’ perspective and with reference to their needs, this tax is simply not enough. Thus, the overall findings support the idea of enlarging the system to a broader tax mix, just like the ones endorsed by most of the neighboring countries.

Keywords

• slovakia
• local self-government
• local finance
• shared tax
• personal income tax