TAX DESIGNATION SLOVAKIA Fedor Blaščák Year Number of eligible recipients Number of participating individuals Number of participating corporations Amount - Individual tax payer designation (thousands €) Change on previous year (%) Amount - Corporate tax designation (thousands €) Change on previous year (%) Total amount (thousands €) n.e.3 382n.e n.e ,7n.e , n.e , , , , , , , , , , , , , , , , , n.a , , TOTAL (thousands €):

Slovakia, republic in the central Europe, formerly part of Czechoslovakia, emerged as an independent state in 1993; joining EU in 2004 – with its 5,4 million inhabitants making 1.06% of total EU population. GDP per capita: 28,175 $, rank no. 40 Most famous politicians: Fun facts: Slovakia is the 40th biggest city in the world. 40% of Slovak citizens are living in villages with less than 500 inhabitants.

History of the tax designation 2001: the Law introducing the tax designation was enacted in December 2002: individual tax payers can designate the 1% 2003: the Law was amended enabling corporate bodies to designate 2004: raising the percentage from 1% to 2% for corporations & individuals 2009: introduction of the “matching principle” into the tax percentage system for corporate bodies (if 0,5% own donation → 2% tax designation; otherwise only 1,5%; plus the decreasing model) 2011: raising the percentage from 2% to 3% for volunteers (so far the “response rate” remains very low – only about individual tax payers). 2011: matching principle came to force 2015 – Memorandum on Stabilization of the tax percentage mechanism – relevant only for corporate tax designation (if 0,5% own donation → 2% tax designation; otherwise only 1%)

Number of participating individuals Total number of tax payers in 2013:

Number of participating corporations Total number of corporations in 2013:

Number of eligible recipients

Distribution of the revenues of the tax designation system from individuals and corporations

Flourishing sector of corporate foundations Between 1990 and 2001 only 23 corporate foundations were registered in Slovakia. Once the tax designation became available for corporate taxpayers, the number of foundations established by corporate entities started to grow. After 2004 about 60 new corporate foundations were established, obviously due to allowance of corporate designations; many would bear the same name as the founder. By now, there exists up to 90 corporate foundations that makes 20% of all foundations. Especially big companies (from telecommunication, banking or energy supply sectors) allocate extremely big volumes to the foundations that they founded. For example, 12 corporate foundations were listed in TOP 20 of most successful recipients in 2014.

Total amount Total amount in 2002 – 2014 from individuals: 177 million €. Total amount in 2002 – 2014 from corporations: 302 million €.

Distribution of participating corporations according to the matching principle

The effective percentage – tha case of corporations

Issues of discourse - corporations The allocation of designations into corporate foundations led into severe concentration of the funds, these becoming one of the main subjects of critique of each Finance minister regardless the political affiliation. Three major arguments were raised by the politicians throughout the time: tax evasions and misuse of the mechanism through subjects with minimum track record and non-existing public appearance obtaining big allocations, misuse of the mechanism through corporate foundations branding the supported projects with the logo of mothering corporations, thus using the originally public funds for private promotional and marketing activities, fiscal arguments appeared attacking too high portion of revenues of corporate designations became particularly strong within the austerity discourse after 2009.

Issues of discourse - individuals According to the official data 10% of individual tax payers with the highest income allocate more than 80% of overall resources. Analysts of Institute of financial policy have recently expressed serious concerns about altruistic solidarity as a leading principle in their decision making, arguing hypothetically about the role of acquisitive factors present within individual decision making on tax designation´s allocation. The revenue of individual tax payer designation reaches only 1,1% of total revenue of individual tax payers income tax, thus the effective percentage in case of individuals comes up to only about 50% of its total potential. Such results remain unsatisfactory thus challenging the fundraisers in NGO sector. So far, very low response rate of the volunteering tax payers who are eligible to designate 3%.

Policy and further research issues Advocating the tax percentage system throughout 2006 to 2015 led towards several successful public campaigns mobilising ad hoc as well as strategic alliances within the NGO sector as well as with other relevant stakeholders in the field, thus contributing towards advocacy capacities and viability of the whole NGO sector in Slovakia. Finally, an unprecedented agreement in April 2015 between the Ministry of Finance and the non-profit sector paved the way for stability of corporate tax designation making the philanthropic incentive through the tax percentage economically more relevant. Further development and observations of the implementation of the new model in Slovakia could contribute resolving the question on whether tax designation incentives help to engage corporations in private philanthropy.