These articles were published in the Spectacular Slovakia travel guide, published annually by The Slovak Spectator since 1996. The latest editions can be obtained from our online shop.

EU, NATO a must for Slovakia

Tax expert wishes the answer was not so often "I don’t know"

Remi Troch, a partner with Deloitte & Touche tax advisory services, has been in Bratislava almost exactly a year after spending three years in Warsaw. He has been with the firm 30 years, 25 of which have been spent in his native Belgium. "After such a long time I wanted to do something else, and when the opportunity came up to go to central Europe I didn’t hesitate," he says.

Spectacular Slovakia (SS): Has Slovakia met or missed your expectations in terms of its business environment?

Remi Troch (RT): Coming from Poland Slovakia seems a bit behind with more investment in Poland likely due to political reasons in Slovakia’s past [the fact the 1994-1998 Vladimír Mečiar government was considered autocratic - ed. note].

While the country is gradually catching up, a lot will depend on the results of elections in September. I think in general the business community is quite confident.

SS: Many tax experts have been unhappy with the nature of tax legislation in Slovakia, saying it’s unclear and almost impossible to get a reliable opinion on. What’s been your experience?

RT: I would say it’s absolutely true, although not only of Slovakia. What struck me in Poland was that every single law was written so unclearly we didn’t know what they wanted to say. For someone coming from the West, used perhaps to the IRS in the United States, where they have 50 booklets detailing everything, here the laws are too general, and the language is often so poorly written, that it’s very difficult for foreign investors.

Another thing that struck me was that the tax authorities tend to interpret the law in favour of themselves, while in the West there is an adage, in dubio contra fisco, which means when in doubt you have to interpret the law against the tax authorities, because it’s their problem if they have written a bad or poorly-phrased law. That is some-thing I still can’t cope with.

SS: Will entering the EU bring more certainty to Slovak tax law?

RT: Definitely, because the acquis communautaire [the EU’s body of legislative requirements for new members - ed. note] will have to be implemented here, such as the parent-subsidiary directive, which will quite dramatically change the tax treatment of dividends received.

I recently read an article in a paper where businessmen were asked what the most important criteria was for investing in another country. Badly enough for me tax came in eighteenth and last place. In first place was certainty and political stability. So joining Nato and the EU is an absolute must for Slovakia. Laws will then be gradually adapted to ‘western’ standards.

SS: Do investors really respond so sensitively to one or another government, or do they make their decisions based on feelings about entire regions?

RT: While there is probably no way back for this region as a whole, I believe that Slovakia’s Nato acceptance will be difficult if certain political conditions are not met. So while the region as a whole is going in one direction, certain countries may indeed become an exception.

SS: Are you happy with the nature and maturity of the public debate on Slovakia’s joining the European Union?

RT: I don’t think the discussion is mature in the sense that 40 per cent of people in EU member countries have no opinion about enlargement and don’t even know which countries are trying to join. I also think a lot of rumours are being spread by certain political parties about the possible consequences for agriculture, which obviously scares people away.

SS: What has your life been like in Slovakia?

RT: People are much more friendly here than in Poland, for instance. When I come to the office and get on the elevator, I see total strangers greeting each other as a matter of course. I’ve never seen that anywhere else.

As far as how I spend my time, I have a satellite at home where I can catch the Dutch-speaking television channels. Weekends are cooking and shopping, trying to get out for a walk, meet other people and travel the country. I still go back to see old friends in Belgium and Warsaw once a month.

The foreign community here is not as lively or as cosmopolitan as what I experienced in Poland, where the community is obviously a lot bigger.

SS: Would you recommend that foreigners try and learn Slovak when they arrive?

RT: I speak Dutch, French, English and German, but oh boy, Slovak... it’s so difficult, all new words. I’m 52 and my memory is not what it used to be. But if I were 25, I would have made it a conditio sine qua non of being accommodated in my host country.

Sometimes in my office I find it a barrier, when people are discussing something technical in Slovak, but are translating it not using the right English terms. And occasionally I have found myself in the shops, just like in the good old days, trying to buy something by indicating it and then showing on my fingers how many I want.

SS: When you look at other foreigners that come through here, particularly business people, what cultural problems and misunderstandings do you see them having?

RT: It is very hard to tell a western company "we don’t know". Western people don’t believe that answer and will never take it as given. They may trust me a little more because of how much experience I have, but the fact is that the laws are so unclear that we really don’t know the answer sometimes, and that is very frustrating for both sides.

People here also tend to need a little bit more time than their counterparts in the West. But I don’t think they can be blamed for that, because until 10 years ago the umbrella system was working, and people didn’t need to take responsibility for themselves.

SS: What are the most important things this country needs to do to improve its record on investment?

RT: Number one is corruption. It is a continuing problem.

Number two is legislation. Laws should be written by lawyers who know what taxes are, and not by politicians who are unfamiliar with corporate income tax issues. I already have grey hair, but it has developed over the last year after some of the things I have seen.

Finally, changing the mentality of officials, convincing them that the western investor is not a thief, he doesn’t come here to steal money and repa-triate the dividends to the West. Why would I do this, if the tax rate in my home country is usually higher than here?

These articles and related information were published in Spectacular Slovakia 2002.

Make your comment to the article... (1 reaction already made)