Slovakia to change current PAYG pension system
SLOVAKIA – Slovakia’s finance minister says the country is planning pension reform that will see a transformation in its current pay-as-you-go system.
“We are preparing pension reform to transfer the current pay-as-you-go system to a programme of real savings in personal accounts,” said Ivan Miklos.
He added that Slovakia is in the process of amending labour market laws “to significantly boost labour market flexibility”.
The move is in line with what Richard Hinz of the World Bank sees as the main trend in worldwide pension reform – the shift from PAYG defined benefit to funded defined contribution schemes.
Writing in the Wall Street Journal Europe, Miklos said Slovakia is also planning to introduce a single-rate, valued added tax that would “simplify the tax system, lower tax evasion and offset shortfalls in budget revenue stemming from income tax cuts”.
He said that several European Union candidate countries have taken aggressive steps to cut taxes and reform their labour markets. “This will create competitive pressure on existing EU members to implement their own reforms.”
Slovakia is set to vote on EU membership later this month. And earlier this week the cabinet approved the Labour Ministry’s proposed five percent pension increase for 2003.
The International Monetary Fund says pension reform in Slovakia is “key to achieving a sustainable long-term fiscal position” – though it warns that reform could entail significant costs.