Slovakia cuts diesel excise tax, slims government

The Slovak parliament approved a cut in diesel fuel duty and endorsed PM Fico's plan to abolish two government ministries.

Slovakia cuts diesel excise tax, slims government

The Slovak parliament approved on Wednesday a cut in diesel fuel duty and endorsed Prime Minister Robert Fico's plan to abolish two government ministries to help offset the consequent drop in tax revenues.

All 128 deputies present in the 150-seat house voted for the diesel tax cut, effective from February, which followed protests by the haulage industry. Earlier this month truckers blocked a busy Bratislava street to press for the fuel price cut and changes to a new motorway toll system.

The finance ministry forecast that the diesel tax cut would cost 102 million euros in lost budget revenue this year.

However, Finance Minister Jan Pociatek rejected opposition demands for a cut in gasoline fuel duty too, saying this would risk making the budget deficit even bigger than planned.

"The public sector budget is currently so tight that this measure would be possible only if we would accept a higher public finance deficit," he told deputies.

Slovakia's export-reliant economy is recovering from a deep crisis which is expected to have pushed the 2009 fiscal deficit above 6 percent of the gross domestic product (GDP), three times the original ceiling.

Fico's government plans to cut the overall deficit to 5.5 percent of GDP this year, despite facing elections in June, from 6.3 percent of GDP expected in 2009. It aims to meet the European Union's official limit of 3 percent in 2012.

Parliament also voted to cut the number of ministries to 12 by abolishing the environment and regional development departments from July. The opposition voted against this proposal.

Pociatek stressed that a smaller cabinet could not be enough to cope with the projected drop in budget revenues and more spending cuts would be needed to keep a planned fiscal consolidation on track.

Slovakia will cut the diesel tax to 0.368 euros per litre from 0.481 euros now. The finance ministry said this would take diesel prices below those in the neighbouring Czech Republic and Hungary, and put them in line with Austria.

After years of stellar economic growth, Slovakia slipped into a deep contraction last year which erased much of its 6.2 percent growth from 2008. However, the European Commission expects it to emerge from the crisis as the EU's fastest growing member this year.

Reuters
Last Mod: 20 Ocak 2010, 20:03
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