Slovak chemical company Duslo seeks record tax relief

Slovak chemical company Duslo a.s. has requested a record setting, EUR 58 mln tax relief from the state in order to keep operational in Slovakia, the Slovak newswire Slovak Spectator reported, Aug. 5.

“Duslo is seeking a 10-year tax relief of ca. EUR 58 mln, which, if granted, will be the highest tax relief given to a single company in the last 12 years,” the local media reported. “In exchange, the company promises to invest EUR 300 mln into construction of a new ammonia production plant and increasing ammonia production by 100,000 tonnes annually, to 300,000 tonnes by 2017.”

Earlier this year, Duslo hinted that if the company does not receive the tax relief, it might move production to either Czech Republic or Germany, due to high gas distribution prices in Slovakia.

Originally, the company wanted to retain existing personnel in place. However, recently Duslo announced that it plans to create 80 new jobs, which some have seen as an attempt to obtain the tax relief in accordance with relevant Slovak legislation on investment. The legislation, however, is not clear whether a company must create new jobs in order to get a tax relief.

According to the Slovak law, the provision of tax relief for a company that invest more that EUR 200 mln is in the hands of the Slovak Ministry of Economy, which must ask the European Commission for approval. Following the Duslo’s request for the tax relief, the Slovak Ministry pf Economy sent the request to Brussels.

Both economic analyst and government opposition politicians have criticized the proposed tax relief.

According to Ivan Stefanec, MEP for the Slovak Democratic and Christian Union (SDKU), there is a serious conflict of interest connected with the proposed tax relief for Duslo. In a letter sent in mid-July to Joaquin Almunia, the EC commissioner responsible for competition, Stefanec pointed out business connections between the current Slovak Minister of Economy Pavol Pavlis and Czech Finance Minister and business tycoon Andrej Babis, whose Agrofert group owns the chemical company Duslo.

The opposition Freedom and Solidarity party also criticized the possibility of the EUR 58 mln tax relief. The party’s head, Richard Sulik, pointed out that EUR 58 mln is equal to the corporate income tax paid by 40,577 SMEs.

“It is absolutely obvious that the state budget will miss this money,” Sulik said, as cited by the Slovak Spectator.

On the other hand, Slovakia’s Pharmaceutical and Chemical Industry Association said that it sees the Slovakia’s chemical sector as one that was the hardest hit by strict EU legislation and insists that the state assistance for Duslo is a good decision.

“We live in an environment in which individual EU member countries compete with each other in providing various forms of assistance to significant investors,” Roman Karlubik, a head of the association stated, as cited by the newswire. “In spite of the constantly proclaimed liberalization of the market, a really liberal market within the EU does not exist for real.”

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