The Property Tax in the Slovak Republic: Major Reforms and Striking Results

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BYU ScholarsArchive Citation Bryson, Phillip J., "The Property Tax in the Slovak Republic: Major Reforms and Striking Results" (2006). Faculty Publications. 989. https://scholarsarchive.byu.edu/facpub/989

This Peer-Reviewed Article is brought to you for free and open access by BYU ScholarsArchive. It has been accepted for inclusion in Faculty Publications by an authorized administrator of BYU ScholarsArchive. For more information, please contact [email protected], [email protected]. The Property Tax in the Slovak Republic: Major Reforms and Striking Results

By Phillip J. Bryson, PhD

This article is based on a presentation given on August 24, 2005, at the International Property Tax Institute’s 8th International Conference on Property Tax in Transition held in Prague, Czech Republic.

hen the communist era ended Brussels and also to add a regional level Wwith the Velvet Revolution in 1989, of government to share the burdens of Czechoslovakia embarked on a program subnational public service provision. of transition to a market democracy. Legislation provided for the necessary Public sector foundations featured the institutional changes in both countries, creation of local government finance and but it was in Slovakia that the reform intergovernmental fiscal arrangements, of public administration was seen as a including limited use of local user fees. complement to, rather than a substitute After institutions were established on for, fiscal decentralization. the basis of legislation, the two countries This article reports on recent Slovak ef- agreed in 1993 to go separate ways in what forts to pursue these institutional changes. came to be called the Velvet Divorce. The First, it will review the early characteristics division opened the way for the pursuit of of Slovak fiscal decentralization focusing divergent fiscal practices, but for the first on the property tax as the most important decade of the separation, there were no source of locally generated revenues. fiscal changes to signal movement into Next will be a discussion of the divergent new, divergent directions. developments in the fiscal systems of the Efforts to establish genuine fiscal two republics despite their similar fiscal decentralization were not impressive decentralization programs. The reforms in either country before talk of acces- of public administration pursued in the sion to the European Union began. As early 2000s is the next topic; here, too, that happened, both republics became some of the implications of the widely dis- committed to adopt “reforms of pub- cussed Slovak introduction of the “single lic administration” and to move from tax” along with other changes that were two levels of governance—central and part of a new fiscal system implemented at municipal—to four. They prepared to the beginning of 2005. The final section submit themselves to governance from offers some concluding observations.

Philip J. Bryson, PhD, is the Douglas and Effie Driggs Professor of Economics in the Mar- riott School of Management at Brigham Young University. He earned his PhD in economics from Ohio State University.

Journal of Property Tax Assessment & Administration • Volume 3, Issue 2 19 Fiscal Decentralization in the any formal consultation of the Slovak Early Slovak Transition people, political leaders unilaterally de- The Republic of Slovakia has a popula- cided to abandon the federation. Slovak tion of 5.364 million in an area of 49,012 leaders rejected any partnership with the square kilometers. The Slovak population Czechs, along with the Czech preference density approximates that of Portugal, for a rapid transition to a market orienta- Hungary, and France, with significantly tion. Both before and after the opening more space for the average Slovak than of the reform era, the Slovaks were that available for the average Czech. Slova- substantially less comfortable with depar- kia has 109 citizens per square kilometer ture from the order and security of the of territory to the Czech Republic’s 131. Soviet ways than were the Czechs. This This compares to 228 citizens per square philosophical difference was evident in kilometer for Germany, 105 in France, 28 a provision of the new Slovak constitu- in the United States, and 32 for Europe tion which “establishes the possibility to as a whole. (Štatistický úrad Slovenskej stop...the process of privatization and/or republiky 1997). restrict business activities and to reverse Slovakia was a part of federal Czecho- various measures that already had been slovakia from 1918 to 1993. After the taken in this respect.” (Valko 1997, 76) end of WWII, democracy faltered and As one would expect, however, the the federation continued as a Soviet- Slovak self-government and fiscal sys- type Socialist Republic. With the end tems continued for a time to resemble of the Soviet Union, the Warsaw Pact, those developed jointly with the Czechs and the Council for Mutual Economic late in the Czechoslovakian era. In the Assistance (CMEA), both the Czechs aftermath of the Velvet Revolution, both and the Slovaks have been in transition republics encouraged municipalities to to democratic, market systems. Reestab- seek independence from some of the lishing local autonomy and utilizing the forced amalgamations of the previous property tax as a fundamental revenue era. Under socialist rule, local autonomy source to finance municipal services are had largely been lost. From 1950 until potentially vital elements of this transi- 1989, decisions about the quality and tion. An effective property tax must be type of public services were made by based upon the market value of property, central governments in Prague and since the market is a non-arbitrary reflec- Bratislava. Regional governments existed tion of the incomes and the preferences during this period only to administrate that determine property values. and facilitate the policies of the central A property tax system based on market government. Local government activity real estate values is just now becoming was also limited almost exclusively to a reality in Slovakia. For economic and such “state administration” activities. political reasons, a normally functioning It should be remembered that the real estate market, like the new market sys- economic transition of these countries tem generally, has been developing only followed hard on the heels of an era gradually. Legacies of the socialist era and in which centralism had been rather constraints on the privatization of prop- absolute. Funding decisions had been erty have not been the only roadblocks. based on political and party influence Early in the transition, the Slovak central and evinced no close relationship to the government preferred to ignore local self- citizenry’s needs or demands for public government, postponing the dramatic services, especially in the area of capital progress that was to emerge later. expenditures. Many local services were Nevertheless, transition reform efforts provided by the central government, e.g., launched after the Velvet Revolution police, public utilities, fire protection, were rather successful. In 1992, without and education. Socialist systems also

20 Journal of Property Tax Assessment & Administration • Volume 3, Issue 2 provided a number of services western sisted in the development of a professional governments do not, including housing, core of local public managers. There is which was produced and managed by the also an organization of city finance direc- central government just as medical care tors whose operations are similar to those was. Still, permitting local governments of the Government Finance Officers As- to function largely symbolically actually sociation in the United States. ran counter to Slovak tradition. Theses groups offer regular training and When the transition era began in 1989, professional development. They strive to local governments increased in strength influence policy relative to intergovern- and number. There are currently 2,781 mental financial relationships and local of them and only a few have a popula- service provision. The existence and activi- tion in excess of 50,000. The majority ties of these types of groups appear to have of Slovak municipalities have fewer than been positively influenced by the former 500 inhabitants and many have less than U.S. Agency for International Develop- 100. Comparing the number of cities per ment (USAID) mission in Bratislava, which 10,000 inhabitants in nine Central and assisted in establishing local administrative Eastern European countries reveals that infrastructure in Slovakia and in training Slovakia (like only the Czech Republic) managers of local governments. has significantly more cities than other In Bratislava, the Association of Cities countries in the region (see table 1). and Towns of Slovakia (Združenie Miest A Of these neighboring countries, only Obci Slovenska [ZMOS]) represents local Hungary’s cities and towns compare in governments in their interaction with number to those of the former Czechoslo- the central government. This association vakia. The diminutive size of Slovak and is similar to those of numerous other Czech municipalities raises the question countries. It participates in drafting and of whether they have sufficient personnel reviewing legislation on local govern- and resources to administer local government administration and policy and has ment effectively. About 125 of the cities also organized a foundation to train city in the republic have created the position employees to perform local government of City Manager to assist Slovak elected functions. ZMOS has more than 2,700 officials in their management functions. members and thus represents over 95% Several supportive organizations have as- of Slovakia’s municipalities.

Table 1. Number of subnational government units in selected transition economies

Type of Number Country Municipalities Country Government Of Units Population per 10,000 Albania Municipality 356 3,400,000 1.05 Bulgaria Municipality 255 8,900,000 .29 Czech Republic Municipality 6234 10,300,000 6.05 Hungary Municipality 3148 10,006,000 3.06 Poland Municipality 2459 38,400,000 .64 Romania Municipality 2948 22,700,000 1.30 Russia Municipality 2000 149,000,000 .13 Slovakia Municipality 2781 5,300,000 5.25 Ukraine Municipality 619 52,100,000 .12 Source: Calculated from Bird, Ebel, and Wallich (1995). Czech and Slovak data from in- country sources.

Journal of Property Tax Assessment & Administration • Volume 3, Issue 2 21 Decentralization Difficulties and the of communism, fiscal crises have been Property Tax in Transition Countries common in the transitioning countries Overcoming the legacies of central plan- and transfers of funds from the center ning has proven to be a difficult and slow have been insufficient to cover needs. process (Bryson and Cornia 2004). To Municipalities have been unable to enjoy say that local governments have often re- genuine autonomy, especially because mained underfunded is a euphemism, at they lacked sufficient sources of indepen- best. Having no significant sources of in- dent revenue that a number of countries dependent funding, municipalities have raise through the property tax. had to wait for transfers and grants from That tax, potentially the most impor- central governments too often gripped tant source of local revenues, remained with fiscal crises of their own. Central strictly the nominal tax it had been un- governments have generally been unwill- der central planning. In the transition ing to abandon the centralist traditions period, the four most important revenue of the previous era, which implies a sources for the Slovak Republic were the policy preference for indirect and non- familiar VAT, the personal income tax, transparent taxes and for public services corporate income tax, and an income tax which provoke no substantive political on unincorporated businesses. Although opposition. Citizens of the localities have all of these were collected by the central been disinclined to pay for public service government, only VAT revenues were not provision; they have preferred funding shared with local governments. through transfers from the center rather This system was based on identical leg- than from local taxation. Central govern- islation to that enacted in Czechoslovakia ments have been willing to make what before the Velvet Divorce. After the Velvet transfers they could, but retained control Divorce, institutional inertia and preoc- over the programs funded. cupation with other problems kept either As the transition began, the citizens republic from making substantive changes of transitional countries were not always in the fiscal system for some time. Osten- opposed to foregoing generous public sibly, pre-accession motivation provided goods provision, since they anticipated a by the European Union convinced the larger and more readily available assort- Slovaks to launch the recent, bold reforms. ment of private goods they perceived to But before that time, the differences be- be common in market economies. Thus, tween the two fiscal systems were not always they silently accepted the willingness of great. The Slovak fiscal system was inclined their local governments not to pursue any less toward centralization than its Czech substantial efforts to charge fees or im- counterpart, although both countries pose property taxes that would produce emphasized a desire to achieve decentral- an independent source of revenues. As a ization and to develop self-government result, local officials were not forced to (samospravy) for their municipalities. confront their constituencies with taxes to fund badly needed services. Property Tax Rate and Base When Czechoslovakia began to decen- Property tax policy is established by the tralize its fiscal system in 1990, legislation central government and national legisla- established more Western-style institution, but the day-to-day administration of tions. The government borrowed heavily the property tax is largely the domain of from Western Europe, adopting taxes Slovak municipalities. This contrasts with prevalent there without reference to the Czech system in which the central whether such a system was optimal for government collects the property tax transition countries, or whether that and redistributes the revenues to the system could generate revenues suf- municipalities. ficient for their needs. Since the end The taxation of land was based on the

22 Journal of Property Tax Assessment & Administration • Volume 3, Issue 2 area of each individual parcel; similarly, capita revenues from the tax on land the taxation of buildings was based on the declined continuously, although not number of square meters of a structure’s monotonically. For the tax on build- floor space, including the land area under ings, the opposite held: as municipality the buildings. The tax rate was established size increased, per capita tax revenues separately for the two kinds of properties. increased continuously. In larger cities, In the property tax formula, adjustments the tax burden was shifted more to struc- were made for the location of land and tures. The implications were: buildings and for the particular utilization • because land is a resource that of the taxed unit. These modest, largely cannot be removed from the symbolic efforts to account for market region to avoid the tax, the land characteristics were a genuflection to tax is underutilized in Slovak market valuation. cities, keeping badly needed Of the eleven Slovak classifications revenues below their potential. of land, eight adjusted the assessed tax Moreover, value for the quality of the land, which was estimated by the Ministry of Agri- • although there is an intent that culture. The data collected on quality these taxes be borne by busi- and potential productivity were remark- ness, a selling point to local ably detailed. Parcels in close proximity inhabitants, the tax burden will sometimes had substantial differences in ultimately be shifted to consum- estimated productivity. ers in any case, unless the tax In the transitional property tax system, has lump-sum rather than excise basic tax rates ranging from one Slovak characteristics. crown (SKK) to ten Slovak crowns per The property tax law of the Slovak square meter (adjustable annually) were Republic granted explicit exemptions applied to six classes of buildings rang- for state-owned, cultural, religious, and ing from residential to industrial. The other such properties. An exempt owner basic rate increased by .75 SKK for each of commercial real estate was taxed floor. The tax on buildings allowed for at a rate of about one-third of that for two additional adjustments: commercial organizations. In the larger • Data on the size and type of a cities, exemptions have represented building could be multiplied by a substantial portion of the potential a population-based coefficient, property-tax base, severely limiting the with that for the largest cities revenue capacity of the tax system. being greater than that for the Implementing a tax system with capacity smallest towns by a factor of 4.5. to generate sufficient revenues for public services and other exigencies, then • The local administrator could undermining the program with exemp- apply a final coefficient to the tions, is clearly self-defeating. formula evaluating a building’s In pursuit of a presumed objective to location within the city. This promote private housing construction, could increase or reduce the explicit, 15-year exemptions were grant- tax bill by as much as 50%, giv- ed for newly constructed and recently ing city administrators a modest renovated homes. Since the property degree of flexibility in taxing for tax base and rates of the transitional differential location qualities. system did not produce a large yield, the Data on per capita land and building incentive effect of this policy had little taxes under the transitional system (see actual significance. Buildings restituted figure 1) revealed a pattern of significant to former owners were also relieved of revenue generation in Slovak municipali- property taxes for a 15-year period. ties. With increasing municipal size, per In the transitional system, local govern-

Journal of Property Tax Assessment & Administration • Volume 3, Issue 2 23 ments were responsible for the collection era are proceeding gradually. of property tax data and the tax itself. One expects with an area-based tax that They relied on the centrally operated there will be a close relationship between cadastre for information pertaining, for the area of a plot or of a building and example, to the ownership of proper- the tax revenues either would generate. ties. Specific information on land areas Interestingly, this is not the case in Slova- was available from the cadastre, but that kia (Bryson and Cornia 2001). Certain agency was of limited help in identifying classes of land are taxed far more heavily land. Since it does not record information than others; building plots in all Slovakian on building size, it could provide no assis- cities produce more revenue per square tance in assessing the tax on buildings. meter than arable land or forests. The In the Slovak property tax system, the same holds for taxes on improvements. municipality/taxpayer relationship has Industrial and commercial buildings pro- been fraught with asymmetric informa- duce much greater revenues per square tion. Information laws have prevented meter than agricultural or apartment the municipalities from verifying im- buildings. Apparently, the heaviest tax portant data through the cadastre, burden was on commercial and industrial rendering them dependent upon tax- activities, or on capital. Smaller towns and payers to supply the details about their cities were inclined to tax building plots taxable land and buildings. Despite this more heavily than arable land. Probably problem, the finance ministry has not seen as less productive of revenues than publicized any concerns about property farmland, forests were subject to even less tax compliance. Restructuring the fiscal tax than the former. system to increase property tax yields in The ratio for arable land is around 1.25 a substantial manner, however, is likely for towns and cities smaller than Bratisla- to produce a compliance problem. It va, where the ratio is considerably lower should be no surprise, therefore, that at 0.14. In the transition property tax sys- changes in property tax laws in the new tem, the smaller towns had a tendency to

Figure 1. Per capita land tax and building tax by size of municipality, 1996

24 Journal of Property Tax Assessment & Administration • Volume 3, Issue 2 put the burden of tax revenues on build- properties, it is potentially neutral. Since it ings rather than on land. Commercial provides fairly constant revenue yields re- and industrial buildings were burdened gardless of the state of the business cycle, with consistently higher taxes than build- it is stable. Since relevant taxpayers are ings for other uses. Apartments and homeowners and property holders, they agricultural buildings provided services are more likely to have the means and and products viewed in the communist the ability to pay the property tax. This era as necessaries, so they were subject to is in contrast to the highly popular, yet whatever subsidization would keep their regressive, excise taxes, which represent a prices very low. There was, therefore, larger proportion of lower than of higher a central planning legacy of minimal incomes. Further, if local public services taxation for these items. By contrast, improve and enhance property values, it industrial and commercial activities and is appropriate that the beneficiaries are properties were a targeted source of rev- required to pay for the increased value. enue, a tradition that continued into the Finally, as a direct tax, it is highly visible to transition. It should be noted, finally, that taxpayers (Musgrave 1993; Oates 1996). the property tax’s relatively greater im- That visibility is a two-edged sword, of portance to municipalities was structured course. Since they are direct and visible, so that the ratio of tax to square meter of property taxes make citizens and officials building space increased monotonically less comfortable than indirect taxes and significantly as the municipal tax (Youngman and Malme 1994). Gener- jurisdiction became smaller. ally, both officials and citizens prefer This fairly extensive review of the prop- excise taxes and local fees on a variety of erty tax system of the transition era has transactions (Shleifer and Vishny 1998). been designed to demonstrate the sig- Too frequently local officials feel the heat nificance of the changes introduced at the of political problems the property tax beginning of 2005 with the New System. can provoke (Paugam, 1999). Implementing the property tax pro- The Property Tax and Municipal vides both administrative and practical Budgets in the Transition problems: If fiscal decentralization is to succeed, • For transition countries, it is local governments must have access to difficult to establish the market- an autonomous source of tax revenue, oriented property values the tax rather than be dependent upon the suggests, since there is typically central government for all revenues no functioning real estate mar- (Bird, Ebel, and Wallich 1995). The ket in countries beginning the visibility of spending choices made by recovery from central planning local public officials, both elected and (Bertaud and Renaud 1994). appointed, generally exceeds that of national officials. The accountability • Inflation can erode assessments, of such officials logically increases with which are not automatically that visibility (Litvak, Bird, and Ahmand linked to inflation or economic 1998), and makes a strong case for local growth. governance and local tax. • Cadastral data can be of low The property tax embodies many posi- quality and impair collection tive characteristics that recommend it as a and enforcement efforts. local tax. Since taxpayers cannot evade it by engaging in transactions beyond a rel- • The uneven distribution of evant political border, it is immobile. Since the property tax base creates its imposition does not cause changes in inequalities (Netzer 1966). the utilization of the services of taxed Fiscal decentralization can succeed

Journal of Property Tax Assessment & Administration • Volume 3, Issue 2 25 only if the following three conditions can receive such property tax revenues hold. First, there must be a corre- as the central agent’s collection efforts spondence between the expenditure provide. Not being in a position to moni- responsibilities of local governments and tor the collection effort, revenue-hungry the availability of financial resources. subnational governments can only hope Second, incentives must be provided for that the national government will exert subnational governments to mobilize significant effort. their potential resources in their pursuit The data show that revenue from these of autonomy. Third, the provision of taxes is suboptimal since the center lacks transfers from the central government incentive to exert the effort and re- must be transparent and based on objec- sources required to increase the revenue tive and consistent criteria rather than yield. Smaller property tax revenues can, negotiation and ad hoc bargaining (Bird, however, be easily offset by greater trans- Ebel, and Wallich 1995, 59). fers from other taxes or revenue sources. It becomes apparent that the imple- This is certainly the case in the Czech mentation of an effective property tax Republic, where relative to other transi- regime requires close attention to institution countries, the central government tions of governance. In countries where has been anything but a poor provider. time and good judgment have permitted The Finance Ministry would also argue these institutions to develop properly, that local governments do not attempt the rewards of political autonomy have to achieve optimal receipts, since they been achieved for local governments. set their property tax coefficients such that their receipts are only about half Moral Hazard Problems in Property what they could be (Ministry of Finance Tax Administration of the Slovak Republic 2005). Principal/agent conflicts can be expect- It is also a form of moral hazard when ed when the “ownership” (in terms of local government officials, acting as policy prerogatives rather than revenue (insufficiently monitored) agents for receipts) and the administration of the the citizenry, the true “principal” in a property tax are shared by central and democracy, fail to exert an honest ef- subnational governments. Conflicts aris- fort to produce the revenues required ing from the lack of clear ownership are for the public services citizens demand. common in transition countries, largely Once municipalities become financially owing to the very divergent perspectives dependent on the central government, and incentives of local and central gov- they become quite willing to avoid ernments. Moral hazard problems arise full financial responsibility by silently when agents pursue their own interests partnering in their principal/agent ar- rather than those of the principal. In rangements. They become comfortable Slovakia, the property tax is the design in permitting the center to take all the re- of national policy, but it is collected by sponsibility for raising municipal funds, the municipalities themselves. There is thus avoiding any potential political heat no malingering in the collection effort a serious property tax might generate. It of the local governments, since the rev- is easier to conform to central guidelines, enues are badly needed. mandates, and directives than to take a The significance of these institutional stand for local preferences that clearly arrangements is apparent when com- differ from those of the center in a less pared to the Czech system, in which local bureaucratic and centralized system. government is the principal and central Still considering the Czech case, if the government acts as the agent. The center center compensates for its lack of effort both designs policy and collects the tax, in property tax collection by providing so that the local government principal revenues from other sources—even if lo-

26 Journal of Property Tax Assessment & Administration • Volume 3, Issue 2 cal governments are financially no worse their Slovak counterparts. Local budgets off, these alternative revenues often come in Slovakia were only about 14% of the with “strings attached.” Other moral total national budget, while those of the hazard issues emerge with central gov- Czech Republic ranged from 25% to just ernment revenue transfers. For example, over 33% of the national budget. if the distribution of resources is badly The difference in municipal grants skewed across subnational governments, shows why Slovak municipalities were or if subsidies encourage local govern- comparatively quite poor. Grants in ments to pursue activities of high priority Slovakia ranged from 1.5 billion Slovak to the center, their fiscal redistribution crowns (SKK) in 1993 to 1.1 billion SKK becomes very appealing (Musgrave 1961). in 1994. The grants paid by the Czech But transfers from the center can merely central government to the municipalities offset revenues that could have been ranged from just over 27 billion Czech raised locally. If the central government crowns (CZK) in 1993 to 59.5 billion CZK compensates the municipality for the in 1996. (One should keep in mind that property tax funds it has failed to collect, the population of the Czech Republic is local officials can act less transparently. twice as large as that of Slovakia, but also Because the Slovak central government that the Czech crown will purchase from was initially far less generous in provid- 1.25 to 1.3 Slovak crowns.) Interestingly, ing transfers, Slovak municipalities had in the years just prior to Slovak indepen- to take advantage of their opportunity to dence (1991 and 1992), the government collect property tax revenues for them- in Prague provided grants of 7.9 billion selves. From the 1960s until the end of and 2.4 billion crowns respectively for central planning, local governments in Slovak municipalities. Thus, indepen- the Czechoslovak federation derived dence from the Czechs turned out to be roughly 60% of their total receipts from a financial shock for municipalities in the subsidies. From around 1984, however, Slovak Republic, for it separated them central government subsidies began to from the Czech central budget. In that decline. This trend extended into the period, Slovak municipalities also found transition to market economics and that politics would separate them from democracy. By the mid-1990s, subsidies the Slovak central budget. Then prime represented no more than 25% of the minister Vladimir Mec˘iar, preoccupied total receipts of Czech and Slovak mu- with what the political opposition termed nicipalities (Pekova 1996). the “family privatization” of Slovak in- The data for the transition period re- dustry, had no interest in helping solve veal the relevance of these moral hazard the financial problems of Slovak towns, considerations. They are reviewed com- cities, and regions. Mec˘iar’s autocratic prehensively for the period of transitional leadership style and his lack of interest finance in the two republics from the end in municipal development was a clear sig- of central planning to 2000 by Bryson and nal that they could expect no significant Cornia (2004). They reveal Slovakia’s mu- transfers or grants from Bratislava. nicipalities to be substantially poorer than Since they had far less substantial finan- those of the Czech Republic. After the cial support from the central government, Velvet Divorce in 1993, Czech municipal Slovak municipalities were much more budgets were more than twice as large as diligent in their efforts to harvest prop- those of Slovakia. This was at least partly erty tax yields and thus the property tax a result of per capita differences in grants represented a significantly larger share of from the respective central governments. the total revenues of local governments. By the end of the period, per capita public Using data from the finance ministries of services expenditures for Czech citizens both republics, Bryson and Cornia (2004) were three times greater than those for calculated that for the years 1993 to 2001,

Journal of Property Tax Assessment & Administration • Volume 3, Issue 2 27 the real estate tax in Slovakia provided The New Post-Transitional Fiscal from roughly 11% to 18% of the revenue System in Slovakia for municipal budgets (table 2). On aver- Foundations of the New System were laid age, property tax revenue represented in Slovakia in the period preceding acces- about a 15% share of total receipts for sion to EU membership in May 2004. The Slovak municipalities. In the Czech Re- emphasis of the EU during that stage was public, with larger municipal budgets, the not on fiscal decentralization for the two real estate tax ranged from 3.28% of total republics, but on a related action, i.e., the municipal revenues up to a maximum reform of public administration. of 4.8%. Although Czech property tax In marked contrast to the Slovak case, revenues were relatively small in 1993, the Czech Republic was interested in a the trend thereafter was toward smaller honing of organizational arrangements, receipts. The Slovak municipalities clearly seen most graphically in the creation of demonstrated greater effort in collecting the new regional level of government. the property tax. The goal of the reforms was to modern- Table 3 illustrates the disparity between ize central administration and provide the share of total national budget receipts “territorial public administration” to enjoyed by municipalities in the Slovak Re- improve the quality of the public sector’s public and the Czech Republic. Whereas products as a whole (Bureš et al 2002, the Czech municipalities received a share 8). Regional governments are ostensi- of around 30% of total governmental bly to “bring state administration to the receipts, Slovak municipalities received people” (priblížit státní správu obcanum), only around 6%. Given their financially involving rank-and-file citizens in sub- less comfortable circumstances, it is national governance processes. But the little wonder that Slovak municipalities question whether the reform of public attempted more diligently to harvest administration could effectively serve as greater property tax revenues. a substitute for municipal autonomy, i.e., Both republics struggled in the transi- for fiscal decentralization, has not yet tion era with periodic fiscal crises, the been adequately addressed. result of which was often a reduction in While pursuing the mechanics of such municipal revenues. The Czech govern- organizational questions, the Czech ment was good about avoiding unfunded finance ministry and political apparatus mandates, but it retained strong influence were developing a social welfare state. over the use of centrally provided funds, That implied more generous provision thus inhibiting local autonomy. The Slovak of the expansive kinds of entitlements municipalities had little to work with, but provided in most of Western Europe, espe- seemed to exhibit more independence cially pensions and health care. In doing with what revenues they did receive. so, the central government began to run large budget deficits and accumulate a

Table 2. Real estate tax as percentage of municipal budget revenues 1993 1994 1995 1996 1997 1998 1999 2000 2001 Slovak Republic 10.45 13.81 12.57 14.73 15.60 16.97 18.81 17.89 16.00 Czech Republic 4.80 4.74 4.01 3.93 3.60 3.43 3.42 3.28 3.68 Source: Bryson and Cornia (2004) Table 3. Local budgets as a percentage share of the national budget 1993 1994 1995 1996 1997 1998 1999 2000 2001 Slovak Republic 5.89 6.82 6.46 7.70 7.61 6.91 5.67 6.19 6.95 Czech Republic 25.45 28.78 30.35 35.29 29.79 30.34 30.16 31.98 26.26 Source: Bryson and Cornia (2004)

28 Journal of Property Tax Assessment & Administration • Volume 3, Issue 2 growing burden of debt. It has long since provide for their own management. recognized the impossibility of an indefi- The conception and design of the nite expansion of public expectations and Slovak reform was introduced early by commitments. It is now desperately seek- an official paper (Government Office ing ways to increase national revenues, of the Slovak Republic 2000) listing the but the reality of the macroeconomic situ- functions that would continue to be ation is that it will be necessary to reduce performed by local state administration expenditures in the next few years. This officials after the reform. These central- essential focus on the national budget has government responsibilities included removed the focus of the finance ministry local police services, criminal investiga- and the political system from the mu- tion, military administration, the state nicipal situation and the process of fiscal veterinary office, the state hygienist office, decentralization (Ministry of Finance of the environmental office, the cadastral the Czech Republic 2005). office, the land and forest office, the la- Interestingly, pre-reform Slovakia par- bor and social services office, and the tax alleled the Czech case in that samosprava office. This is an imposing list of activities (local self-government) was performed for which Slovak municipalities will have by elected municipal officials. In a sepa- neither responsibility nor managerial pre- rate office, local “state administration” rogatives. As explained earlier, the Slovak activities and programs were performed municipality, within its fairly narrow range by agents of the central government. of ceded responsibilities, received little An inference as to the resources com- funding but rather liberal managerial mitted by central government to local authority throughout the transition era. state administration can be made from The Slovak national government in- employment figures. Before the reform tended for this situation to change and of public administration in 2000, state the reforms have been bringing about administration employed 287,817 Slovak the desired change in a striking manner. citizens. That represented 84.7% of total Reforms are also moving the munici- government employment. Only 52,100 palities toward substantive change. The were employed in self-government at the Slovaks recognize what this process local level, which was only 15.3% of total requires and that a reorganization or government employment. After imple- reform of institutions cannot be an effec- mentation of the reforms, employment in tive substitute for fiscal decentralization. state administration declined from nearly Effective governmental organization and 85% to 37%, while the number employed fiscal decentralization are policy comple- in local self-government increased from ments rather than substitutes. The Slovak approximately 15% to 63% (Nižnˇanský central government conceded (Govern- and Kling 2002, 252). In 2001, the total ment Office of the Slovak Republic 2000, expenditures of local offices of state ad- 4) that decentralization of public affairs ministration were 58 billion SKK. Local must include “decentralization of func- governments in that same year spent only tional responsibilities, decentralization 30.6 billion SKK. So direct spending by of finances, decentralization of political the central government for the munici- power…” The complex process of de- palities was nearly twice as much as the centralization is only effective “if it is independent municipal governments implemented in all three dimensions at spent. It was high time for a reform of the same time.” this unthinkable centralization, although But while they were reforming, the to Slovakia’s central authorities “state Slovaks wanted more than marginal orga- administration” represented little more nizational change. They considered their than the state’s solution to the problem economic future imaginatively and were of very small municipalities unable to prepared for additional adjustments,

Journal of Property Tax Assessment & Administration • Volume 3, Issue 2 29 although Slovak economic development that the share of revenues from property throughout the transition period had of- taxes were considerably lower than in nu- ten been surprisingly strong. Among the merous countries in either the European struggling transition states, the Slovak Union or the Organisation for Economic Republic has been stronger in relative Co-operation and Development (OECD). terms than one would have supposed, As a result, the ministry intended to especially considering its political situa- strengthen the property tax as a part tion through the Mec˘iar era. of the package of changes designed to The initial economic successes Slo- promote the process of fiscal decentral- vakia experienced in its independence ization. Following is a discussion of some era were due in large measure to a of the main changes announced by the mini-boom in exports. Prosperity and Ministry of Finance (2004b) that went expansion in Western markets provided into effect on January 1, 2005. demand, and the shift was made success- Before the reforms, central govern- fully from the old CMEA markets to the ment had announced their allocation important EU markets. Sensible mon- of transferred tax revenues to the mu- etary policy kept inflation within bounds nicipalities each year in the State Budget and although development was spotty, Act. This process was “unstable” and did leaving some regional unemployment not permit the cities and towns to engage levels high, progress was fairly steady. in effective planning until after the an- So, the introduction of reforms around nouncement had been made. The New 2000 brought some striking new poli- System was designed to stabilize the flow cies, including the institution of a “flat of revenues to local governments and tax” (Knˇako 2002). This tax featured a give them an opportunity to engage in common rate of 19% for corporate and multiple-year financial planning. personal income tax, as well as for the The finance ministry announced that VAT. Details of the New System were the personal income tax was to become spelled out in a document published by an “own” source of revenues for both the Ministry of Finance (2004a). regions and municipalities. Of the total The principal objectives of the tax revenue from this tax, municipalities reform were to achieve fairness and sim- were henceforth to receive 70.3% and plicity while eliminating double taxation. the regions 23.5%. Only 6.2% of the rev- One should keep in mind that the fiscal enue was to remain a part of the national reforms were only a part of the overall budget (Ministry of Finance of the Slovak reform effort being pursued during this Republic 2004a, 31). The general notion period. Nižnˇanský and Pilat (2002) co- was that roughly one-third of municipal gently present the entire transition era revenues would now come from the as a pursuit of multi-front reform. Public personal income tax transfers, one-third administration reform alone comprised would come from grants from the central four processes: changing the territorial ar- government and the European Union, rangement, reforming extant institutions and one-third would come from munici- and creating new regions, decentralizing pal own revenues, i.e., from the property public finance powers and competencies, tax, local user fees, and from privatization and modernizing the system’s legisla- of publicly-owned assets (ZMOS 2005). tive framework and management. From Local governments received the right the perspective of this article, the New on January 1, 2005, to set “tax rates” (a System’s ramifications for local finance term applied, interestingly, not only to the are of particular importance. real estate tax, but apparently also to the Among the many considerations mo- very limited number of user fees already tivating the reform at the local level, it extant) and to introduce new “taxes.” The was significant for Slovak policymakers municipalities also received full discre-

30 Journal of Property Tax Assessment & Administration • Volume 3, Issue 2 tion to apply exemptions according to accomplished by the creation of a special their own preferences. Potentially more law “containing the definition and struc- important was that municipalities were ture of tax revenues for municipalities also given policy control over the property and higher territorial units and criteria tax. In the first place, they were to use the for their redistribution to municipalities funds they raised through the property and higher territorial units’ budgets.” tax, like those transferred to them from This intended assurance does little for the personal income tax, autonomously; the proponent of fiscal decentralization, the state denied itself any right to specify since that concept seems threatened the uses to which these revenues could be when central government defines tax put. Moreover, all the old laws pertaining structures for subnational governments to the coefficients applied to property and for redistributing revenues. classifications under property tax admin- Later in the same document, the Gov- istration were now null and void. The ernment of the Slovak Republic (2002, municipalities could use the property tax 4) addressed the issue of the developing independently. The real estate tax, along real estate market, the values of which with the charitable donation deduction would replace the old coefficient system. and the inheritance tax, were eliminated It said, “Depending on how realistic real as a part of the tax reform (Zachar 2004, estate prices become, which is a basis 38). The objective of the new legislation for the taxation of property transfers, on real estate tax was to create a legal ba- the Government will revise the current sis for transparent taxation of real estate property tax rates and adopt correspond- based on market valuation. ing solutions to unify them.” What the It should be observed that in the short government defines as realistic or what time since the inception of the New Sys- actions it would take in the absence of re- tem, the property tax has not become alistic prices is not stated. However, given a more important source of revenue. past traditions, the policy course would There have been no plans to increase likely involve regulatory activities. This revenues from this source in budgets to appears to further contradict the current 2007 (ZMOS 2005). Early in the year of stated policy of letting municipalities inception, it appeared that municipal work out their own property tax rates. self-government had gained by these new The perception of the Ministry of Fi- developments. At the same time, resourc- nance (2004b, 33) was that the reform es seemed no less scarce at the municipal of public administration and the changes level. As the new rules came into effect, connected with the accession of Slovakia the larger cities felt that they gained less to the European Union were the driving through the change than some of the forces behind the creation of the new, smaller ones, but institutional change comprehensive legislative framework in resource allocation often produces developing the budgetary process in winners and losers, requiring some modi- the sector of public administration. The fications or institutional accommodation finance ministry documents evince a far to the changed system. less distinct tone of centralism. The Government of the Slovak Repub- lic (2002, 2) made its own statement of A Tentative Assessment of policy intent promising to protect the Reform Effects interests of taxpayers. It promised it would The New System as applied to local increase the tax revenues of municipalities governments has been in the imple- and define the tax revenues of regions in mentation phase for too brief a time to such a way as to assure that the tax burden say how effective it will be, although it is on individual taxpayers and businesses clear that the effect will depend both on would not be increased. This was to be the macro impacts of the new tax system

Journal of Property Tax Assessment & Administration • Volume 3, Issue 2 31 on the national budget and the ability of vergent with those of Europe by the subnational governments to leverage achieving trade competitiveness their new policy maneuverability into in EU and world markets; and enhanced tax revenues. • to reduce poverty and unem- Since the initiation of the new tax ployment, partially a function system at the national level late in 2003, of the marginalization of the Slovakia’s economic performance has Roma ethnic group and the appeared to improve. The Republic’s east-west development gap in recent growth rates were strong at 5.5% the country. in 2004, finishing the year at 5.8% for the final quarter of the year (Slovensko.com In the long term, these achievements 2005). Growth was expected to be some- may be feasible if Slovakia can continue what less in 2005, but it was sufficiently its currently strong economic perfor- strong, coming during a period of low mance. Data from the Statistical Office growth throughout Europe generally, to confirm the recently strong growth, but cause widespread notice and discussion of it is interesting to put it into temporal Slovakia’s improved macroeconomic situ- context. Table 4 indicates quarterly ation. The International Monetary Fund GDP for 2003 and 2004; table 5 provides (2005) and Organisation for Economic greater temporal perspective by showing Co-operation and Development (2004) annual GDP growth from 1993 to 2004 found Slovakia’s strongly increased out- in both current and constant prices, the put expansion commendable and noted latter removing the inflationary bias to that the country’s fiscal and external im- provide an indication of real growth balances had diminished considerably in rates per annum, as indicated in the last recent years. The increased transparency column of the table. and greater incentive compatibilities usu- These numbers show the recent, ally attributed to the reforms have helped positive economic performance, but improve the business climate and attract they do not demonstrate that growth is foreign direct investments. Real Gross a response to the stimulus provided by Domestic Product (GDP) expanded by Slovakia’s recent New System of national 4.5% despite a contraction in domestic and local finance, or more specifically demand in 2003. But increased activity in that they are a response to tax reduc- the domestic sector and accommodating tions. Since economic growth had been macroeconomic policies permitted real strong in the early transition period GDP growth estimated at 5.25% for 2004. to about 1999, the return to over 4% Further progress is still badly needed; growth in 2002 could be interpreted employment gains have been uneven simply as some kind of economic re- across sectors over the period described, covery. Although European economies and unemployment at 17.75% remains were largely stagnating in these slower very high. years and there was a general slowdown The World Bank (2004) agreed with in the U.S. economy in 1999 through this assessment, but observed the need early 2002, exacerbated by the terrorist for the Slovak Republic attacks of September 2001, it is not likely that the slowdown in Slovakia following • to achieve fiscal consolidation initially strong transition performance supportive of appropriate pub- was simply cyclical. Such an explanation, lic finance management; however, might explain why Slovakia, in • to complete ongoing reforms an economic environment influenced in health, pensions, and public by the stagnation of some important EU finance; players, likewise entered into a slower growth phase. It does not explain why a • to develop income levels con-

32 Journal of Property Tax Assessment & Administration • Volume 3, Issue 2 simple recovery beginning in 2000 and the New System would have to be that the 2001 restored the Slovak Republic to elimination of some taxes and the reduc- its previously high growth rates without tion in tax levels should provide growth changing the stagnant environment re- stimulus sufficient to offset the reductions. sponsible for the slowdown. That leaves This has not yet occurred, however. it necessary to consider seriously the The third column of table 6 shows ac- notion that growth over the past two or cumulated revenues as received monthly, three years was a function of economic while accumulated expenditures are stimulus arising from reduced taxes and shown in column four. A simple calcula- increased direct foriegn investment in tion of the growth of budget receipts and Slovakia. budget expenditures yields results that Crediting the New System with ending are interesting to compare with GDP or the period of sluggish growth, however, general economic growth. To make the does not explain what it was that made measurements comparable, the data are Slovakia perform well in the earlier tran- taken in current prices. sition period under the old fiscal system. Government revenues from 2003 to Such an explanation might lean on 2004 grew at the rate of only 4.01%, while Slovakia‘s reaping the benefits of a suc- GDP grew at the rate of 10.35%, again in cessful shift from CMEA markets to what current prices. (Without an adjustment would become EU markets in the early to constant prices, growth would be over- transition period along with positive eco- stated proportionately for the general nomic conditions and expectations in economy as well as for budget receipts the region during the early transition and expenditures in the period in ques- period. These things were followed by tion, since some of the growth would be a boom in the U.S. economy and the attributable simply to price increases.) So stimulus that phenomenon provided the budget receipts did not grow as rapidly world economy in the late 1990s. as the economy as a whole, reducing the But the concern here is less with the advantage of the rapid economic growth macro performance of the Slovak econ- from the perspective of the public sec- omy in this period than with the budget tor. It is important to note, as the Slovak performance. It is of interest to the pres- Republic currently struggles with national ent study that the growth in the overall deficits and debt, that policymakers man- economy has not yet translated into aged to make the growth in expenditures higher budget receipts for the government at any level. From the perspective of Table 5. Slovakia GDP growth, 1993-2004 the Slovak government, the rationale for (Constant Prices, 1995=100)

Table 4. Slovakia GDP, 2003, 2004 Constant P’s Growth over Current P’s Year previous yr. 2003 (Mill SKK) 1993 411,366 512,849 1Q 272,980 1994 495,649 544,674 6.20 2Q 300,801 3Q 309,682 1995 576,502 576,502 5.84 4Q 317,733 1996 638,449 611,935 6.15 Year 1,201,19 1997 712,679 640,151 4.61 1998 781,437 667,107 4.21 2004 (Mill SKK) 1999 844,108 676,919 1.47 1Q 308,722 2000 934,079 690,697 2.04 2Q 330,367 2001 1,009,839 716,845 3.79 3Q 336,791 2002 1,098,658 749,937 4.62 4Q 349,606 2003 1,201,196 783,406 4.46 Year 1,325,486 2004 1,325,486 826,493 5.50 Source: Štatistický úrad Slovenskej Source: Štatistický úrad Slovenskej republiky (2005a) republiky (2005a) and own calculations

Journal of Property Tax Assessment & Administration • Volume 3, Issue 2 33 (8.21%) more in line with the increased of centrally-specified, local user fees; GDP growth, although it was still a little and the privatization of state-owned as- less than the growth of the economy. sets transferred to municipalities at the Whether this rate of growth of expendi- outset of the transition period. tures seems justified or appropriate, it still The development of reforms of public contributed to deficits and debt, since it administration, undertaken in the pe- exceeded the more modest 4.01% growth riod prior to Slovakia’s accession to the rate of revenues. European Union, included the adoption of the New System of national and local Concluding Observations finance that caught widespread attention The strong macro beginnings enjoyed by because of the elimination or reduction the Slovak Republic did not secure fiscal of many of the country’s taxes, both na- well-being for the local governments. tional and local, and the adoption of a The unusual politics of that era left common rate or “flat tax” of 19%. municipalities in a position that made It was hoped that the New System would them work very hard to generate all the provide encouragement for investment local revenue they could, which was done (both domestic and foreign) and stimu- mostly through energetic collection of late economic growth. The economic property tax revenues; the imposition growth rate did increase substantively, which was unusual given the sluggish Table 6. Republic of Slovakia: Budget and conditions prevailing in most of Europe at GDP growth, 2003-2005 the time. One might observe that Slovakia (Millions SKK, Current Prices) had enjoyed relatively strong growth in the Year Mo Σ Revenues Σ Expenditures early years of the transition and postulate 2003 1 22,300 24,000 that the growth of the past two or three 2003 2 31,800 44,800 years was just a return to that normal level 2003 3 46,400 64,200 of performance. But that explains neither 2003 4 67,008 91,600 why the original growth rates were not 2003 5 79,100 109,600 maintained nor why they were resumed. 2003 6 100,900 128,600 It seems reasonable, as was suggested in 2003 7 127,700 158,800 the previous section, that the original 2003 8 147,100 180,200 growth period ended with the incentive in- 2003 9 163,400 201,100 2003 10 186,800 227,200 compatibilities of the old finance system, 2003 11 203,600 246,400 the loss of early transition momentum, 2003 12 233,100 289,000 and the lack of dynamism in Europe in 2004 1 21,031 23,689 general. Growth momentum was regained 2004 2 36,394 40,818 when reforms were given renewed vigor 2004 3 66,945 65,770 early in the present decade. 2004 4 98,132 92,409 It is not helpful to paint a picture more 2004 5 109,176 111,446 beautiful than the reality it intends to 2004 6 120,695 133,150 portray. The recent local government 2004 7 139,126 157,677 provisions of the New System are bold and 2004 8 153,715 178,501 consistent with the changes made at the 2004 9 172,840 202,262 national level. They do, in fact, provide 2004 10 195,858 226,386 municipalities with greater opportunities 2004 11 213,675 247,753 to find their own way financially, which 2004 12 242,444 312,732 will enhance their political autonomy. 2005 1 24,644 20,334 The fact remains that the local govern- 2005 2 39,789 40,897 2005 3 65,0463 62,246 ments remain fiscally challenged. As the state assigned the lion’s share of personal Source: Štatistický úrad Slovenskej repub- income tax receipts to local governments, liky (2005b) it simultaneously transferred the responsi-

34 Journal of Property Tax Assessment & Administration • Volume 3, Issue 2 bility to them to fund a large proportion Policy statement of the government of the of the education programs previously Slovak Republic, Public Finance Reform. funded nationally. But greater opportuni- November. http://www.vlada.gov.sk/ ties were also provided for the subnational dokumenty/programove_vyhlasenie_ governments (regions had been added to vlady-20021104_eng.rtf. territorial samosprava) to act with greater Government Office of the Slovak Repub- autonomy in the financial realm. The state lic. 2000. The concept for decentralisation will not permit municipalities to expand and modernization of public administration. local property tax efforts in a manner Bratislava: Government Office of the that will increase the overall burden of Slovak Republic. Slovakia’s taxpayers, but municipalities do have opportunities to function much International Monetary Fund. 2005. IMF more independently. One continues to executive board concludes 2004 Article IV con- hope that more autonomous subnational sultation with the Slovak Republic. February governments will ultimately be the key 17. http://www.imf.org/external/np/ to substantial increases in the revenue- sec/pn/2005/pn0524.htm. generating capacity of the subnational Knˇako, M. 2002. Danová reforma 2002 governments of Slovakia. [Tax reforms, 2002]. http://www. mesa10.sk/vs/index.asp. References Litvak, J.I., R.M. Bird, and J. Ahmand. Bertaud, A., and B. Renaud. 1994. Cities 1998. Rethinking decentralization in develop- without land markets. Washington, DC: ing countries. Washington, DC: The World The World Bank. Bank. Bird, R.M., R.D. Ebel, and C.I. Wallich. Ministry of Finance of the Czech Repub- 1995. Fiscal decentralization: From com- lic. 2005. Interviews by author. March. mand to market. In Decentralization of the Ministry of Finance of the Slovak Re- socialist state: Intergovernmental finance in public. 2004a. The fundamental tax reform. transition economies, ed. R.M. Bird, R.D. December. http://www.finance.gov.sk. Ebel, and C.I. Wallich, 1–67. Washing- Ministry of Finance of the Slovak Repub- ton, DC: The World Bank, 1998. lic. 2004b. Updated convergence programme Bryson, P.J., and G.C. Cornia. 2001. Land for the Slovak Republic covering the pe- and building taxes in the Republic of riod 2004–2010. November. http://www. Slovakia. In The development of property finance.gov.sk/En/Documents/IFP/ taxation in economies in transition: Case Publications/CP2005_final.pdf studies from Central and Eastern Europe, Ministry of Finance of the Slovak Repub- ed. J. Youngman and J. Malme, 51–66. lic. 2005. Interviews by author. March. Washington, DC: The World Bank. Musgrave, R.A. 1961. Approaches to a fis- Bryson, P.J., and G.C. Cornia. 2004. cal theory of political federalism In Public Public sector transition in post-commu- finance: Needs, sources, and utilization, nist economies: The struggle for fiscal 97–122. National Bureau of Economic decentralisation in the Czech and Slovak Research. New York. Princeton, NJ: Republics. Post-Communist Economies 16 Princeton University Press. (September): 265–283. Musgrave, R.A. 1993. Who should tax, Bureš, P., P. Fejtek, T. Holenda, M. where, and what? In Tax assignment in Holubová, K. Chrástková, M. Jalovecká, federal countries, ed. by C.E. McLure, Jr., E. Jelínková, J. Klein, E. Komárek, M. 2–19. Canberra: Australian National Uni- Kopkášová, et al. 2002. Public administra- versity, Centre for Research on Federal tion reform in the Czech Republic. Prague. Financial Relations. Government, Slovak Republic. 2002. Netzer, D. 1966. The economics of the prop-

Journal of Property Tax Assessment & Administration • Volume 3, Issue 2 35 erty tax. Washington, DC: The Brookings Štatistický úrad Slovenskej republiky. Institution. 2005b. Plnenie Státneho Rozpoctu, Nižnˇanský, V., and J. Kling. 2002 Verejná Ukazovatele Ekonomickeho Vývoja. správa [Public administration] In Sloven- http://www.statistics.sk/ sko 2002 Súhrnná správa o stave spolocnosti Valko, E. 1997. Legislation. In Global Verejná správa. Bratislava: Panorama. report on Slovakia: Comprehensive analyses Nižnˇanský, V., and J. Pilat. 2002. Public from 1995 and trends from 1996, ed. M. administration reform in the Slovak Re- Bútora and P. Huncík, 75–86. Bratislava: public—Management of the process. In Sándor Márai Foundation. Mastering decentralization and public adminis- World Bank. 2004. Slovakia coun- tration reforms in Central and Eastern Europe, tr y brief. September. http://web. ed. by G. Péteri, 215–232. Budapest: Open worldbank.org/WBSITE/EXTERNAL/ Society Institute, Local Government and COUNTRIES/ECAEXT/ Public Reform Initiative. SLOVAKIAEXTN/0,,menuPK:305126 Oates, W.E. 1996. Taxation in a federal ~pagePK:141132~piPK:141107~ system: The tax-assignment problem. theSitePK:305117,00.html. Public Economics Review 1(1): 35–60. Youngman, J.M., and J.H. Malme. 1994. Organisation for Economic Co-op- An international survey of taxes on land and eration and Development. 2004. buildings. Deventer, The Netherlands: Economic survey of the Slovak Repub- Kluwer Law and Taxation Publishers. lic 2004: What key challenges does ZMOS. 2005. Interviews by author of or- Slovakia face? http://www.oecd.org/ ganization officials. Bratislava. March. document/45/0,2340,en_2649_201185_ 26234605_1_1_1_1,00.html. Additional Sources Paugam, A. 1999. Ad valorem property Bryson, P.J., and G.C. Cornia. 2001. Taxes taxation and transition economies. Working on real property in the Czech Republic. Paper No. 9. Washington, DC: The World In The development of property taxation in Bank, ECSIN, Infrastructure Sector Unit economies in transition: Case studies from of the Europe and Central Asia Region. Central and Eastern Europe, ed. J. Young- Shleifer, A., and R.W. Vishny. 1998. The man and J. Malme, 39–50. Washington, grabbing hand: Government pathologies DC: The World Bank. and their cures. Cambridge, MA: Harvard Frydman, R., A. Rapaczynski, and J. University Press. Turkewitz. 1998. Transition to a private Slovensko.com. 2005. Slovak economy property regime in the Czech Republic growing the fastest in Central Europe and Hungary. In Economics in Transition: region. March 11. http://www.slovensko. Comparing Asia and Europe, ed. W.T. Woo, com/news/2070. S. Parker, and J.D. Sachs, 48, 49. Cam- Štatistický úrad Slovenskej republiky. bridge, MA: MIT Press. 1997. Medzinárodné prehl’ady [Inter- Pekovà, J. 1996. Obce a dotace [Munici- national compendium]. In Štatistická palities and subsidies]. Obec & Finance Rocenka Slovenskej republiky 1997 [Statistical 1(1): 28–31. yearbook of the Slovak Republic]. 627f. Zachar, D., ed. 2004. Reforms in Slovakia, Bratislava: Štatistický úrad Slovenskej 2003–2004: Evaluation of economic and republiky. social measures. Bratislava: INEKO, Insti- Štatistický úrad Slovenskej republiky. tute for Economic and Social Reforms. 2005a.Ukazovatele Ekonomickeho July. http://www.ineko.sk/english/ Vývoja, Hrubý domáci produkt a Štátny publications_heso_2003_2004.pdf. rozpocet. http://www.statistics.sk/

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