Rome, July 9, 2004
Business Environment in EU after Enlargement
Rome, July 9, 2004
• Business Environment in EU
• Priorities for Internationalisation
• Slovak Tax Reform
• EU Challenges
• Summary
Rome, July 9, 2004
Business Environment in EU
Rome, July 9, 2004
Global Competitiveness by World Economic Forum
Rank Country1 Finland2 USA3 Sweden4 Denmark5 Taiwan6 Singapur7 Switzerland8 Island9 Norway10 Australia
Rome, July 9, 2004
GDP per capita
1.Luxembourg
33.Slovakia
44.Latvia
40%
0%
60%
60%
Non EU EU 25 EU 15 New EU Members
Rome, July 9, 2004
GDP Growth in last 7 years
2.Ireland
13.Slovakia
67.Belgium
60%
30%
40%
10%
Non EU EU 25 EU 15 New EU Members
Rome, July 9, 2004
FDI bringing New Technology
1.Ireland
7.Slovakia
87.Slovenia
70%
25%
30%
5%
Non EU EU 25 EU 15 New EU Members
Rome, July 9, 2004
Quality of Math and Science Education
2.Belgium
11.Slovakia
76.Portugal
50% 25%50%
25%
Ine staty EU 25 EU 15 Novi clenovia EU
Rome, July 9, 2004
SWOT
StrengthsGrowth in new EU countries
The largest Single Market
Purchase Power
Stable Currency
WeaknessesCAP
Structure of EU budget
State Budget Deficits
OpportunitiesEasy Market Access
Flexible Labor Market
Simple Tax and Administrative Rules
ThreatsShort Term Approach
Decision Making Process
Rome, July 9, 2004
Priorities for Internationalisation
Rome, July 9, 2004
Priorities
1/ Easy Market Access
2/ Flexible Labor Market
3/ Simple Tax and Administrative Rules
Rome, July 9, 2004
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
Rome, July 9, 2004
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• <25 far behind• >54 far behind
Rome, July 9, 2004
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
Rome, July 9, 2004
Support for European Enlargement
• European Integration will lead to the Efficiency Improvement
• Economic Standardization
• Cultural Localization
• Regular communication between Business and Politics is inevitable
Rome, July 9, 2004
Slovak Tax Reform
Rome, July 9, 2004
Slovak Top Points
• Referendum for EU entry – the highest percentage voting YES (92.5%)
• European Parliament voting – The lowest number of MEP’s 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%)
Rome, July 9, 2004
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
Rome, July 9, 2004
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
Rome, July 9, 2004
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
Rome, July 9, 2004
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
Rome, July 9, 2004
EU Challenges
Rome, July 9, 2004
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
Rome, July 9, 2004
Summary
Rome, July 9, 2004
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
Rome, July 9, 2004
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
Rome, July 9, 2004
Business will contribute by the growth to the
improvement of quality of lives in EU