By: Vida Kocjan
Amendments to the Income Tax Act, higher taxes and lower wages, real estate can be taxed more, sole proprietors need to be screwed. This is what we remember most from the pre-election promises of Robert Golob, the president of the Gibanje Svoboda party, who won the most votes in this election.
“I do not need an additional thousand euros, so the income tax reform is wrong. We must turn it upside down,” said Robert Golob in one of the confrontations. By doing so, he only confirmed what we have witnessed in the National Assembly in recent months, when MPs from the KUL coalition opposed the fact that employees would receive higher net salaries. Let’s remember. The government adopted changes to personal income tax legislation, which increased the general relief, thereby lowering personal income tax. Under this law, each employee will receive a higher net salary, gradually, by 2025, personal income tax would be reduced so that each employee would receive one net salary more per year. The changes are already in force for 2022, for the first time a lower personal income tax was in force on the March salary paid in April. As the law is valid for the whole year, taxpayers will receive the overpaid personal income tax for the first two months after receiving the informative personal income tax calculation for 2022. Golob now announces that he will change this “because he does not need an additional thousand euros”.
Unified with the Levica party
Golob is considered to be united with the Levica party, which tried to prevent changes to the personal income tax law by announcing a referendum in which people would decide whether they want higher salaries or not. Because Levica found that this could affect the elections, they withdrew from the announcement of a consultative referendum. Levica party was also supported in the National Assembly by other KUL parties (SD, LMŠ and SAB), for some time now, in accordance with the KUL, MPs Janja Sluga and Jurij Lep, who joined the Gibanje Svoboda party, also voted accordingly. The party also told the Finance newspaper that they were both already voting on their instructions. By the way, both were also elected to a new convocation of parliament.
The economy supported Janša’s government
The economy welcomed the amendment to the Personal Income Tax Act, which allows employees higher net salaries, as Slovenia is extremely taxed in the field of income, which is also pointed out by the Organisation for Economic Cooperation and Development (OECD). A Slovenian worker receives a much lower net salary at the same gross salary as in Austria. Economist Matej Lahovnik said that it was “logical that the government (under Janša’s leadership – fn.) carried out such a personal income tax ‘mini’ reform, because in this way it prevents young professionals from going abroad”. Recall that the government also planned to introduce the so-called social caps, when employees would pay a lower income tax above a certain amount, their net salary would be higher, which would motivate young and educated people not to go abroad to work.
Equality of all in poverty
Golob also opposes this, and Lahovnik commented that it was “ordinary populism, which is the path to equality in poverty, because the best people will still emigrate from Slovenia as no one will agree that the state collects more than half of his gross salary”. He reminded that the OECD had written the following as a guide to Slovenia: “If we want to maintain a constant favourable economic trend, we must continue with structural reforms, and in the field of taxes, work must be relieved.” The OECD also warns of the need to relieve wages and introduce a social cap. The biggest problem is the high tax burden with the contributions of higher gross wages, so many engineers and experts emigrate from Slovenia and go abroad.
All empirical analyses show that a very big problem in Slovenia is the high progressive taxation of labour, which means that with the increase in gross wages, the average and marginal average tax rates also increase sharply. In other words, if an entrepreneur wants to hire a development engineer or IT specialist on the world market and give him the expected income he always expects in net amount, because he is interested in what he will get on his account, the company in Slovenia will have to pay significantly higher gross salary compared to a company in Austria. It should also be reminded that demographic trends also show that people with a very low level of education or even without it immigrate to our country, and the most educated go abroad.
The work needs to be relieved
Professor Anže Burger also pointed out that work in Slovenia is over-taxed with above-average incomes. He said that the increase in the general relief, which was introduced by the Janša government, was the most expensive form of tax relief for income, but the latter should be relieved in Slovenia.
Real estate taxation
Income tax is not everything that the Levica party strives for, and they are also supported by Golob. It is also about real estate taxation. The Levica has already proposed a law on the tax on empty and large real estate, in which the limit for the size of real estate that would not be additionally taxed is 160 square meters. Economist Matej Lahovnik commented on the Levica’s proposal, saying that it was “substantively wrong and unfair, as real estate is never taxed by square meters, but by value”. According to this proposal, for example, a 180-square-meter house in Haloze would be taxed more than a four-room apartment in the middle of Ljubljana, although the value of such an apartment is several times higher than a house in Haloze. The value and possibility of renting out real estate is determined primarily by location. In Ljubljana, the values of real estate are record-breaking and several times higher than the officially estimated values of the Surveying and Mapping Authority of the Republic of Slovenia (GURS). Lahovnik pointed out that three- or four-room empty flats in Ljubljana are rented out for as much as 1,000 euros a month. In the rest of Slovenia, except, of course, on the Coast, the situation is significantly different, and it is often difficult to rent out real estate. Therefore, taxation by square footage instead of value would be very unfair. In addition, many people built houses and weekend houses with their own hands, giving up many things. “They paid all the required fees for the construction or purchase of real estate, including various contributions for utility connections and building permits, so they are wondering why they would pay additional fees,” Lahovnik commented on the Levica’s proposal, which is most likely coordinated with Golob.
He added that many older people live in large houses or flats that are already difficult to maintain with pensions, and with a tax base based on the taxation of surplus square footage, it would be even more difficult. Moving to smaller properties in the old years is common abroad, but in Slovenia it is difficult for most people to imagine due to their habits. “Housing policy should be based on greater availability and accessibility of land builders and not on additional real estate taxation,” added Lahovnik.
Taxes need to be reduced
Matej Lahovnik answered our question how he comments on Robert Golob’s promises and forecasts about higher taxes, including higher taxes on sole proprietors (standardised persons) and real estate tax, with the words “I do not comment”. In one comment, however, he wrote that the new government would have to “continue to encourage work and make work worthwhile. If it does not continue to reduce taxes, but even decides to introduce new ones and raise existing ones, while raising social benefits, we can quickly find ourselves in major economic difficulties. The greatest danger is that there will be a decline in economic activity and high price growth at the same time, which economists call stagflation. Inflationary pressures are growing, so one of the biggest challenges is how to curb high inflation without lowering economic growth”.
He has no economic programme
Golob states that he will double the added value in the economy. However, Aleš Cantarutti, Director General of the Chamber of Commerce of Slovenia, emphasised: “A serious economic programme is necessary. We are in a situation where it will be decided whether Slovenia will continue to reduce the gap with the most developed EU countries, or we will lose the positive momentum and we will have to face the challenges of ensuring fiscal and social stability.” Robert Golob has not shown any serious economic programme so far.
Economist Janez Šuštaršič: “It seems to me that we can expect some action first without a prior plan”
We asked economist Dr Janez Šuštaršič, former Minister of Finance, for an opinion on Robert Golob’s promises and forecasts in the economic and tax fields. “In the field of taxation, Mr. Golob announces the immediate repeal of the latest amendments to the Personal Income Tax Act. This does not seem wise to me, because the economy and people need predictability, and not that taxes change just because of elections. One is opposition to government measures, when you are in opposition or in an election campaign, but when you take over the government, the adoption of measures should be more prudent. If he wants to change the tax system, he should first appoint a finance minister, analyse the effects of recent changes, and only then prepare well-thought-out systemic changes, if he so wishes. In the economic field, higher added value and a green transition are predicted. So, we can expect a lot of incentives and subsidies to invest in everything that is green, and that can be beneficial. Regarding the increase in added value, he will only have to say what measures he envisages. In any case, the increase in value added in the real economy is something different than in a company with a privileged market position in state ownership, from which it comes. When I listen to what he says, it seems to me that we can expect some measures without a prior plan – replacing all those set by the previous government without a clear system and criteria for appointing new ones – and recklessly abolishing tax changes – and only then a more prudent medium-term targeted action.”