The State Has Already Lowered Its Expectations for Transaction Tax Collection. Revenues From April to July Still Fall Short of Even the Revised Estimates

The state originally planned to collect over €575 million in transaction tax this year. In July, however, it became clear this was unrealistic, and the forecast was revised down to €420 million. Yet, statistics after four months now point to a total annual collection of just €378 million for 2025.

Transaction tax revenues continue to fall well below expectations. From April to July 2025, the tax brought in only €168 million for the state budget (as of August 31), clearly underperforming compared to the state’s revenue projections. If this amount were averaged and extrapolated to cover the entire April–December period, the total collection would reach €378 million. That is a full third less than the original target of €575.5 million, and still below the revised estimate of €420 million announced by the Ministry of Finance on August 1. These figures come from the Ministry’s Interim State Budget Performance data published online.

Transaction Tax Fuels the Shadow Economy and Reduces Other Tax Revenues

The lower revenue suggests the tax is poorly designed. More concerning, however, is the broader economic damage it causes. By encouraging the shift to cash transactions, the transaction tax actively discourages compliance with other taxes. As a result, the state not only fails to collect the planned amount from this tax but also sees reduced revenues from income tax and VAT.

This trend was already confirmed at the end of June by analysts from the Institute for Financial Policy (IFP) at the Ministry of Finance. Compared to February’s forecast, the IFP now expects total tax and levy revenues this year to be €452 million lower, with the shortfall against the approved budget reaching as much as €933 million.

Since the details of the new transaction tax were published, it was clear the projected revenue was unrealistic. Unfortunately, the damage goes further: the structure of the tax incentivizes the use of cash, much of which never enters company accounts and instead flows into the shadow economy—already among the largest in the EU and now likely to grow further. On top of this, Slovakia has the EU’s second-highest tax and social security burden on labor, as well as excessively high corporate income tax for large firms. This combination has weighed heavily on the economy since the start of the year, leading to a significant slowdown.

The worsening economic climate has also resulted in a dramatic decline in foreign direct investment. While in 2023 Slovakia attracted 484 investments worth about €3.95 billion, in 2024 there were only 28 projects worth €1.7 billion, and for this year, expectations are below €500 million.

Business Conditions in Slovakia Are Deteriorating, Companies Respond With More Aggressive Tax Optimization

The transaction tax is an anomaly—within the EU, only Hungary applies a similar levy, and even there under different conditions.

The main problem, aside from its unusual role in the tax system, is the imbalance it creates between cash and non-cash transactions. Non-cash transfers, which automatically appear on bank statements and thus in company accounting, are taxed at 0.4% (up to a maximum of €40). Cash payments, on the other hand, are not subject to the tax. This strongly encourages greater reliance on cash, part of which inevitably escapes company accounting and flows into the shadow economy. Already one of the highest in the EU, it is now very likely to grow further.

Global experience shows that cash transactions almost always motivate businesses to shift part of their activities entirely off the books. In addition, under conditions of excessively high taxes and burdens, companies pursue even stronger optimization strategies. Instead of complicating the system, the state should aim to simplify it and design taxes in a way that motivates compliance rather than avoidance. The current Slovak tax system does the exact opposite. It contains unnecessary exemptions, heavily taxes income, and imposes an extreme burden on labor costs. This pushes companies toward aggressive optimization—leaving the state with even less revenue.