Tatra Air gets opportunity to get back in the air from the Slovakian Finance Ministry

Published: 5/26/1999

After a three months" hiatus, Slovakia may shortly have a domestic air carrier operating on its territory. This depends on Tatra Air fulfilling the terms of an agreement, made on May 13th 1999, with the Finance Ministry. Under the terms of the deal, the Finance Ministry offered to waive one of Tatra Air‘s two debts to the state, comprising 21m Slovak crowns in unpaid import duties, which date back to 1992. In return, Tatra Air must now pay off its remaining debt and submit a business plan to ministry officials for approval. According to the Finance Ministry, Tatra Air currently owes the state 66.7m crowns in unpaid Value Added Tax (VAT), accrued since 1992, on two Saab 340 aircraft imported by the airline that year. While grateful for the debt waiver, Mr Jean Charles Bemberg, President of Tatra Air, criticised the Finance Ministry for the delay in resolving the dispute, which began in February 1999, when the Ministry grounded the airline by freezing its accounts and demanding repayment of the full 88m crown debt. Mr Bemberg also condemned the lack of clarity in the waiver procedure, claiming that he had no idea whether the 15m crowns that the Ministry had already taken from Tatra Air accounts against the debt would now be repaid. According to Mr Bemberg, the company effectively paid the majority of the first debt - the waived import duty - when the Customs Office froze Tatra Air‘s accounts, from November 1998 until February 1999, and withdrew 15.6m Sk ($355,000) in operating revenues to pay the duty. He insisted that the Ministry waiver looked more generous than it really was, describing it as “ just an act of advertising for the [Finance] Ministry," adding that “we have the impression that we‘ve been taken for a milk cow!" Ms Brigita Schmögnerová, Finance Minister, confirmed that: “[The waiver] is conditional on Tatra Air submitting a financial report and a business plan for the next few years," and stressed that the Ministry particularly wanted to see Tatra Air‘s planned schedule of installments for paying off the 66.7m crown VAT levy. She warned that: “If this condition is not met, then the waiver won‘t be granted to the company either". Ms Schmögnerová acknowledged that it was in the state‘s interest to have Tatra Air back in operation. Slovakia has not had a domestic airline carrier conducting regular flights since Tatra Air and former national carrier, Slovenské Aerolínie, were grounded by the government owing to operating and financial irregularities earlier in 1999. Mr Karol Nûmec, Tatra Air‘s Sales and Operations Director, explained that both the import duty waiver and the payment schedule for the VAT debt were now being negotiated with the Customs Office and the Finance Ministry. He said that the company was preparing a schedule for payments of the VAT, but that Tatra Air would need additional 57m crowns ($1.2 million) to settle all financial claims and begin operations again. Mr Nûmec attributed Tatra Air‘s tax problems to unorthodox Slovak legislation, contending that few countries in the world levied import duties and VAT on aircraft. He said that the international General Arrangement on Tariffs and Trade (GATT), to which most countries were signatories, espoused an international convention allowing for duty-free import of aircraft and equipment. According to Mr Nûmec, while most western European countries charged no duty on imported aircraft, the Czech Republic applied a duty of 1.2% of the plane‘s value, while Slovakia charged a duty of up to 5.4%. He added that a 23% VAT charge is levied in Slovakia, even on leased aircraft, which he considered to be another anomaly of the Slovak aviation system, and claimed that: “If these duties are not eliminated, Slovakia will have no air traffic at all". On May 13th 1999, Mr Gabriel Palacka, Transport Minister, urged Slovakia to ratify the GATT treaty by the end of 1999, so that it can come into effect from January 2000. He said that, once a member of GATT, Slovakia would be forced to eliminate its duties on aircraft. However, government officials insist this does not mean that Tatra Air will be forgiven its historical debt.

Article ID: 535