Business Environment in EU after Enlargement

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Business Environment in EU after Enlargement
2

• Business Environment in EU
• Priorities for Internationalisation
• Slovak Tax Reform
• EU Challenges
• Summary

3

• Business Environment in EU

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Global Competitiveness by World Economic Forum
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GDP per capita
1.Luxembourg 33.Slovakia 44.Latvia
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GDP Growth in last 7 years
2.Ireland 13.Slovakia 67.Belgium
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FDI bringing New Technology
1.Ireland 7.Slovakia 87.Slovenia
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Quality of Math and Science Education
2.Belgium 11.Slovakia 76.Portugal
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SWOT
Strengths Growth in new EU countries The largest
Single Market Purchase Power Stable Currency
Weaknesses CAP Structure of EU budget State
Budget Deficits
Opportunities Easy Market Access Flexible Labor
Market Simple Tax and Administrative Rules
Threats Short Term Approach Decision Making
Process
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• Priorities for Internationalisation

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Priorities

• 1/ Easy Market Access
• 2/ Flexible Labor Market
• 3/ Simple Tax and Administrative Rules

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1/ Easy Market Access

• Entry Cost to Market
• Denmark 0 fee
• In most EU countries high fee (1500-6000 EUR)
• Entry Time to Market
• Denmark 3 days, UK 5 days
• 2-3 months in some new EU countries
• Simplification of Administration for Start of new
  business

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2/ Flexible Labor Market

• Need for Improvement of Labor Mobility
• More flexible Labor Code
• Working Time
• Variable Job Contracts
• Temporary Workers Use
• Comparison with US
• 25 54 OK
• lt25 far behind
• gt54 far behind

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3/ Simple Tax and Administrative Rules

• Income tax level is lower than in US (average
  13.3 vs. 15.7)
• Social cost is doubled than in US
• (29.9 vs.14.2)
• Social cost reform is necessary in most European
  countries
• Simple and Stable Rules
• Flat Tax

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Support for European Enlargement

• European Integration will lead to the Efficiency
  Improvement
• Economic Standardization
• Cultural Localization
• Regular communication between Business and
  Politics is inevitable

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• Slovak Tax Reform

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Slovak Top Points

• Referendum for EU entry the highest percentage
  voting YES (92.5)
• European Parliament voting The lowest number of
  MEPs against (21)
• The fastest growing economy in Central Europe (4
  CAGR 1997-2004)
• The largest country entering to EU and NATO in
  2004
• First EU country introducing one VAT rate and one
  Flat Corporate and Personal Income Tax (19)

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Development of best and worst items
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Barriers for Doing Business

• Very often changes of legislation
• Income Tax Law -31x, Administration of Taxes and
  Fees -20x
• Too big contents Income Tax Law 4x bigger in 10
  years
• Ad hoc reaction
• Unexpected fast changes of legislation
• Non-univocal explanation of law and potential
  conflicts with Tax Offices

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Tax Strategy

• Need for new complex Tax Strategy
• Taxes should secure funding of public service
• Taxes should have as neutral as possible impact
  for doing business

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Tax System

• Direct Tax
• Profit
• Flat Corporate and Personal Income Tax
• Equity
• Real Estate Tax
• Motor Vehicles Tax
• Indirect Tax
• General Consumption
• Value Added Tax
• Specific Consumption
• Consumer Alcohol Tax
• Consumer Beer Tax
• Consumer Wine Tax
• Consumer Tobacco and Tobacco Products Tax
• Consumer Mineral Oil Tax

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Results of Slovak Tax Reform

• Cancelled Inheritance Tax and Tax on Sale of Real
  Estate
• Flat Tax Introduction
• Savings of only one VAT rate
• Simplicity of Tax System
• Transparency for all Stakeholders
• Stimulation for higher Earnings

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• EU Challenges

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EU Challenges

• Constitution Treaty
• Structure of EU budget
• Tax harmonization
• Position of European Institutions after breaching
  Growth and Stability Pact
• Liberalization
• SME Development
• GDP Growth

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• Summary

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Summary

• EU is on 70 level of US (GDP per capita)
• New EU Members
• GDP per capita
• GDP Growth
• Direct Taxes Decline
• Reforms for Growth
• 1/ Easy Market Access
• 2/ Flexible Labor Market
• 3/ Simple Tax and Administrative Rules

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Joint Objectives with Politicians

• European Union Active Membership
• Simplification of Legislation in order to
  minimize subjective decisions
• Decrease of Social Cost in order to support the
  economical growth and to decrease unemployment
• Support of pro-investment environment for local
  and foreign business including more flexible
  labor market
• Activities focusing on Ethical Standards
  improvement and corruption minimization in
  society

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Business will contribute by the growth to the
improvement of quality of lives in EU