VZCZCXRO0481
RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHSL #0953/01 3421553
ZNR UUUUU ZZH
R 081553Z DEC 06
FM AMEMBASSY BRATISLAVA
TO RUEHC/SECSTATE WASHDC 0522
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 BRATISLAVA 000953 
 
SIPDIS 
 
SIPDIS 
 
FOR USAID 
 
E.O. 12958: N/A 
TAGS: PGOV KDEM PREL SOCI LO
SUBJECT: NGOS WIN CAMPAIGN TO PRESERVE FUNDING MECHANISM 
 
¶1. (U) Summary.  In a significant though by no means 
permanent victory for Slovak civil society, Parliament voted 
on December 6 to preserve for tax year 2006 the option for 
individuals and corporations to assign two percent of their 
tax bills to non-governmental organizations of their choice. 
Smer proposed to reduce NGO revenue sources, but did not 
succeed because coalition partner HZDS declined to support 
the proposal (after some wavering).  During the past two 
months, the Embassy has weighed in heavily with the GOS on 
many levels to preserve the NGO funding mechanism in order to 
show our support for NGOs carrying out excellent 
transformational diplomacy activities outside Slovakia.  The 
approved legislation is far from perfect, however, since many 
advocacy-oriented NGOs will lose eligibilty for funding from 
2007 onward.  The Embassy will continue to engage the GOS and 
Slovak civil society in order to develop a secure long-term 
funding mechanism for the NGO community. 
 
Smer Challenges Civil Society 
----------------------------- 
 
¶2. (U) In September Finance Minister Jan Pociatek proposed 
eliminating corporate assignation of taxes to NGOs, and 
limiting individual contributions to one percent of tax 
revenue.  The proposal was designed to raise up to 1 billion 
SKK (USD 37 million) in new revenue for a stretched federal 
budget, and to eliminate abuse by certain corporations that 
set up phony charities in order to avoid taxes.  Smer also 
argues that the system of assigning taxes directly to NGOs 
was highly unusual, and should be replaced by a system that 
more closely resembles tax deduction systems in other 
countries. 
 
¶3. (SBU) While Pociatek's arguments have merit in isolation, 
the proposal to reduce NGO funding mechanisms without any 
proposed replacement served as an unpleasant reminder of the 
ruling coalition parties' long-standing hostility to civil 
society.  It was also strongly suggestive of these parties' 
insular view of Slovakia's role in the world.  In reality, 
Smer's proposal was least threatening to established, 
U.S.-friendly NGOs working to promote democracy and human 
rights outside Slovakia's borders.  Leading NGOs such as the 
Pontis Foundation, People in Peril, Ashoka, and Partners for 
Democratic Change receive their primary funding from 
international foundations, Slovak Aid, or UN agencies.  Only 
a small percentage of their budgets is procured from the 2% 
assignment rule.  But these same organizations nevertheless 
took the lead in mounting the campaign to preserve the 
funding source, viewing the proposal as a direct challenge 
from Smer to the vitality of Slovak civil society. 
 
HZDS, Power Broker 
------------------ 
 
¶4. (SBU) NGOs looking for new allies found support from an 
unlikely source: HZDS, the party of Vladimir Meciar.  From 
October onward, HZDS MP (and European Affairs Committee 
Chairman) Milan Urbani took the lead in contacting the NGO 
community, indicating that they would not support Smer's 
proposal.  NGOs viewed the party's offer of support with 
skepticism given HZDS' history of trying to suppress their 
activities in the 1990s.  When Parliament convened in 
November, these suspicions were confirmed when HZDS voted 
with Smer in subcommittee, then brokered a compromise 
proposal that would have restricted the program in 2006 and 
eliminated it in 2007.  When the plenary session convened in 
early December, there seemed little chance of a reverse in 
position.  Consequently our lobbying efforts with HZDS and 
Smer intensified.  In response, HZDS brokered support for a 
much better compromise proposal, allowing the 2% assignation 
program to remain unchanged in 2006.  From 2007 onward, 2% 
assignation will be limited to NGOs specializing in charity, 
sports, health, and cultural values.  The final proposal was 
passed with unanimous support in Parliament.  The German 
Marshall Fund's Pavol Demes termed the result as 
"remarkable," and several NGO leaders expressed appreciation 
for our role. 
 
Our Role 
-------- 
 
¶5. (SBU) Many organizations played a part in the victory, 
with NGOs themselves taking the lead through its Ludia k 
Ludom (People to people) campaign. The Embassy remained 
committed throughout the process, engaging broadly with the 
NGO community and then with the government.  The Ambassador, 
DCM, and the Political-Economic section spoke with a wide 
range of political figures about the issue, including 
President Gasparovic, various Ministry officials, and no less 
than a dozen MPs from Smer and HZDS.  Urbani proved to be the 
most valuable contact, taking the lead role in brokering the 
 
BRATISLAVA 00000953  002 OF 002 
 
 
final compromise solution shortly after his December 5 
conversation with Ambassador Vallee.  Urbani told the 
Ambassador that PM Fico was the primary obstacle to 
maintaining the 2% assignation, saying, "He is a communist at 
heart.  If it were in his head he could change, but it is in 
his heart." 
 
Future Prospects 
---------------- 
 
¶6. (SBU) While the legislation passed is fine for 2006, it 
strongly suggests that human rights, education, and 
environment NGOs would be excluded in tax year 2007.  This 
could undercut embassy priority goals in these areas. 
Therefore the embassy will continue to engage the NGO 
community and the GOS over the course of the next year. 
Instead of defending the current program, we would likely be 
working to encourage development of a new funding mechanism 
for NGOs.  Smer officals have indicated to us that they are 
flexible on this point.  FinMin Pociatek has said that he 
would like to develop a new system based on tax deductions 
rather than assignations.  We will begin to hold meetings 
with Smer leaders starting next week to begin moving toward 
new solutions.  On a parallel track, Urbani plans to meet 
with Demes to discuss further proposals. 
VALLEE