They Won’t Rob Banks

The Hungarian move has impressed and inspired other CEE economies: Croatia (less resolutely) and Poland (rather enthusiastically) are mulling over plans to introduce financial taxes of their own. Unfortunately – or fortunately, depending on the point of view – Donald Tusk and his Croatian colleague Jadranka Kosor do not have Orban’s crusading governance style, so the discussions are quite likely to last for a long time and at best end up with a pale copy of Hungary’s we’ll-make-you-pay-for-everything levy.

A couple of days ago, the Economist Intelligence Unit (EIU) has published an article analyzing which countries of the region have much higher chances to see financial taxes implemented. According to the experts, Slovenia could be the next “because of the character of the government and the political environment in which it operates”. Well, with all due respect for the British publication, Slovenia seems less likely than any other CEE state to impose tax on banks and insurance companies – exactly because of “the character of the government”.

Quite untypically for a mature economy (last year, Slovenia’s GDP per capita was $27,700, which is quite comparable to the $30,000 of Monaco and the EU average of 32,500), the country’s government keeps a strong hold on the finanical market. In 2009, the state-owned Triglav Group accounted for 39% of the country’s insurance market, pension fund KAD took up 6.7%, and the credit insurer SID-PKZ – 0.5%. Besides, the Republic of Slovenia holds 51% in NKBM, the owner of Zavarovalnica Maribor, the country’s second largest insurer. It wouldn’t be wrong to estimate that all in all state entities control more than half of Slovenian insurance and pension business.

In the banking segment, the state influence is less visible: in 2009, banks that belong to the Republic of Slovenia accounted for just 20.5% of the total equity figure. However, the share has been rising steadily for the last three years, and the crisis may support the trend.

Against such a background, introduction of a levy on financial instituitons would to a large extent make the Slovenian state its own taxpayer, which doesn’t quite make sense. More importantly, it would also interefere with development strategies of the state entities. To name just a few examples, NKBM has just announced plans to take a sindicated loan of EUR200 million, while Triglav, despite being present in basically all countries of the fomer Yugoslavia, intends to continue expansion in South-Eastern Europe. With a harsh financial levy in the Slovenian tax legislation, all these grand plans would be much harder to implement, which, again, is not in the best interest of the state.

So – everything is possible in this best of all possible worlds, and CEE (and even Western Europe) may yet see financial taxes as punitive as Hungary’s, but Slovenia will likely remain a small island, where banks and insurers, both foreign and domestic, will live happily ever after.