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

Rome, July 9, 2004 GDP per capita 1.Luxembourg 33.Slovakia 44.Latvia

Rome, July 9, 2004 GDP Growth in last 7 years 2.Ireland 13.Slovakia 67.Belgium

Rome, July 9, 2004 FDI bringing New Technology 1.Ireland 7.Slovakia 87.Slovenia

Rome, July 9, 2004 Quality of Math and Science Education 2.Belgium 11.Slovakia 76.Portugal

Rome, July 9, 2004 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

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, / Easy Market Access Entry Cost to Market –Denmark 0 fee –In most EU countries high fee ( 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, / 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 – 54OK <25far behind >54far behind

Rome, July 9, / 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 ) 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 Development of best and worst items

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