Slovnaft turned to the President of the Slovak Republic for new taxation

BRATISLAVA, 29th March 2023

Slovnaft considers the amendment to the law, by which the MPs of the National Council of the Slovak Republic approved the assessment of 70% of the solidarity contribution for 2023, unacceptable, unfair, discriminatory and damaging to the interests of Slovakia. The company has therefore appealed to the President of the Slovak Republic to review the adopted amendment and return it to the National Council of the Slovak Republic.

'The approved law may in its consequences actually mean the termination of fuel production in Slovakia, as it drains cash from our company to an unreasonable and unjustified extent, which could be used in the future to bridge those years when our company will report losses,” letter to the Slovak President reads.

However, Slovnaft should continue its investment activities even during the loss years in order to maintain production and ensure oil stability in Slovakia.

Slovnaft sees the approved law as a direct attack by part of the political spectrum on a long-successful private enterprise of strategic importance, which has an extraordinary multiplier effect on a number of suppliers, household incomes and, consequently, on public finances.

The President has already applied a similar rollback procedure to another energy company. Slovnaft points to the diversity of these cases.

While EUSTREAM, a.s. would have been in potential financial difficulties with the amendment to the Road Act that the President returned to Parliament, mainly because of its past business decisions, in the case of SLOVNAFT, a.s., it is the impact of external regulatory decisions that is at stake. The investments that Slovnaft needs to make and for which it needs resources arise both from the EU's sanction mechanisms in connection with the war in Ukraine and also follow the Green Deal policy. Draining these investment resources through extraordinary taxation will put Slovnaft in existential danger.

To illustrate, Eustream paid out €4.52 billion in dividends to its shareholders between 2013 and 2021, in the case of Slovnaft it was €405 million, as Slovnaft invests most of its profits in the maintenance and operation of the refinery. Thus, by voting or not voting again in Parliament, the ruling parties, including OĽaNO, de facto continue to support the massive export of capital outside the borders of Slovakia.

Moreover, the Members of the Slovak Parliament did not justify the amount of the approved solidarity contribution in any way and did not assess its possible impact on Slovakia's only refinery at all. The EU has set the rate of the solidarity contribution at a minimum of 33 % of excess profits. A rate of 70 % cannot therefore be considered adequate. Such a rate puts the domestic refinery at an extreme disadvantage in terms of its international competitiveness, also because between 60 and 90 % of the sales revenues of the various products which are also to be subject to special taxation are derived from sales abroad.

By comparison, the Austrian refinery is subject to a rate of 40 % for a period of 1.5 years - from July 1st 2022 to the end of 2023. The Austrian refinery can reduce this rate to the recommended minimum of 33 % if it can demonstrate that it has made green investments. This comparison makes it clear that, in a direct competition between two countries and two refineries, Slovakia will actually lose, as the Slovak refinery will not be able to make the kind of investments, including investments in greening production, that its neighbours will be able to make.

“We would also like to draw attention to the fact that if production at our refinery ceases at some point in the future, the Slovak market will not be able to be supplied from abroad. All neighbouring countries, with the exception of Hungary, are unsuccessful in the production of the most demanded fuel - diesel fuel - and SLOVNAFT, a.s., has so far acted as the only so-called balance producer, which has been balancing the mismatch between demand and supply on the entire regional market with its production and sales activities," the letter reads.

Slovnaft considers the adopted modification of the Solidarity Contribution Act to be detrimental to Slovakia in the long term in various aspects - from the threat of stopping the production of motor fuels, to the fundamental reduction of Slovakia's credibility in the eyes of investors due to the high unpredictability of the business environment, to the threat of limiting the economic development of the national economy, employment and the standard of living of the Slovak citizens.