BRATISLAVA – Days after its introduction, Slovakia’s new financial transaction tax has triggered a storm across the political spectrum and on social media where many shared screenshots from banking apps showing how much they are paying after each transaction.

Many saw the new tax, which came into effect on 1 April, the day after the deadline for paying income tax, as a sick April Fool’s joke.

Inspired by Hungary, the only other EU country to introduce a similar tax, the Slovak government pushed through a financial transaction tax that is expected to raise more than €500 million this year and about €700 million in 2026 as part of a broader fiscal consolidation package to which it is an unconventional addition.

The problem for customers? The tax charges 0.4% on certain financial transactions carried out by financial institutions operating in Slovakia and 0.8% on cash withdrawals, although the tax is capped at €40 per transaction.

While it mainly affects businesses and the self-employed, the latter represent a sizeable and politically significant segment of the population.

(More) trouble for the ruling coalition

As banks sent real-time notifications to customers after each transaction, clearly showing the tax deducted, many posted screenshots online, fuelling widespread discontent that was immediately seized upon by the political opposition.

“It’s been a week since the dumbest tax in our history came into effect in Slovakia,” Michal Šimečka, leader of the opposition party Progressive Slovakia (Renew), said on Tuesday, noting that Slovakia can’t afford to stall its economy in the Trump era. 

Šimečka also launched an online petition opposing the tax with the domain name “hlupadan.sk” which in English translates to “stupid tax”. “People’s phones are pinging with reminders of their government’s incompetence,” he added.

Even within Prime Minister Robert Fico’s ruling coalition, the issue is highly divisive.

Just five days after the tax went into effect, Andrej Danko, leader of the far-right coalition party SNS, said he would propose scrapping the measure. If there’s no agreement within the ruling coalition, he said he was ready to take the issue directly to parliament.

When the ruling Smer-SD introduced the tax, Danko said he saw it as a scheme meant to target banks,  “but it’s a scheme on the people,” he said even though the lawmakers from his party had voted in favor of the tax last year.

But after a week of being in force, the coalition is showing signs of fracture.

While some coalition politicians said over the weekend that they were open to discussing either modifying the tax or phasing it out at the end of the year, politicians from the other two coalition parties are now cautiously defending the tax and criticising Danko, accusing him of undermining the coalition and trying to salvage his declining public support.

Fico’s government has only recently overcome an internal crisis and regained stability in parliament. But, the tax threatens to reopen political fault lines.

Banks strike back

Responsibility for collecting and reporting the tax lies with the financial institutions, many of which faced additional costs to implement the new system on time.

“Banks operating in Slovakia will be significantly burdened by the new tax and will be affected in multiple ways,” the Slovak Banking Association said in October 2024, when the tax was being debated in parliament, pointing to multi-million euro investments to change their information systems and adapt their processes to the new legislation.

Some banks tried to turn the situation into a marketing opportunity by offering to pay the tax for newly opened business accounts for the first year.

But these banks continue to send notifications to their clients showing the exact amount of financial tax paid, keeping the issue at the forefront of the Slovak public’s mind.

Enforcement is another growing concern. Many expect that parts of the economy – especially in the service sector – will revert to cash payments to avoid the tax altogether.

Businesses have also voiced concerns, warning that the measure could make Slovakia, already known for one of the highest tax and social contribution burdens in the EU, even less attractive and competitive. The tax could also contribute to inflation, which at 4.1% is already well above the EU average of 2.7%.

Despite mounting public pressure, the government is unlikely to scrap the tax altogether, as the expected revenue is already included in this year’s budget.

The key question now is whether the tax will remain part of a second €2 billion consolidation package expected later this year.

(CS, DE)