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Sunday, February 5, 2023

This Is How Golob Has Made Life Harder For Tenants: He Lowered Their Wages And Increased Their Rents At The Same Time

By: Gal Kovač / Nova24tv

For all the concern that the government of Robert Golob expresses about the terrible situation in the property market, it actually does surprisingly little about it. On the contrary, it is actively making the market situation worse. The new Income Tax Act, adopted by the government last week, will actually increase rents by increasing the tax burden on landlords, thus making life even more difficult for people who are renting their homes.

The worst version of the landlord burden was set by the Šarec government. It taxed rental income at a rate of 27.5 percent, with 85 percent of the income counting towards the tax base. And then came the Janez Janša government, which, with its reform of the Income Tax Act, lifted some of the burden off of landlords, following the general philosophy of tax relief for citizens. The less the state collects, the more is left for the taxpayers. It taxed rent at a rate of 15 percent, with 90 percent of the income counting towards the tax base. But then came the current government of Robert Golob, with its paradigm that taxpayers do not need low taxes, because then they just waste money on nonsense. It raised taxes again to 25 percent, but kept the base at 90 percent of revenues.

In practice, this means that the owner of a studio flat in Ljubljana, which he or she rents out for 500 euros a month, will have an annual income of 6,000 euros. Under the legislation adopted by the Janez Janša government, the taxable base would be 5,400 euros, of which 810 euros would be taxed. Under the legislation adopted a few days ago by the government of Robert Golob, for the same rent, the income of the rental property will still be 6,000 euros, the taxable base will remain the same, meaning 5400 euros, but on this, 1,350 euros in tax will be payable.

The difference between Janša’s and Golob’s taxation is 540 euros or 45 euros per month. Formally, the landlord is liable for this tax and will compensate for the loss of income by increasing the rent.

The new taxation was adopted by the Golob government despite the opposition’s consistent insistence that the measure would make people’s lives more difficult in practice. One of the people who opposed the new law was also an MP of the Slovenian Democratic Party (Slovenska demokratska stranka – SDS), Jožef Lenart, who was a real estate agent himself before he became a Member of Parliament. The other possibility that the Golob government’s measure will cause could be an increase in the size of the informal economy, which will allow landlords and tenants to circumvent the pointless increase.

This came at a really bad time

This is the third time in the last three years that Golob has changed the tax legislation, and it came at a really bad time. The rental market has been getting progressively worse for years now due to the low supply of housing. It is driven by many factors. There is very little construction, and more and more landlords are choosing to rent out vacant apartments to tourists, as they can earn much higher incomes from renting to tourists. Inflation is also a factor driving up rent. As a result, there are fewer and fewer vacant apartments, which are immediately snapped up by tenants. All of this contributes to the fact that in just the last few months, since the end of the summer, there has been a significant increase in rental prices. “If the average price for renting a 75-square-metre apartment in August cost 1005 euros or 13,4 euros per square metre, it now costs an average of 1,050 euros or 14 euros per square metre,” reports the Žurnal magazine.

It should also be noted here that official figures do not tell the whole story. In practice, many landlords negotiate with their tenants to pay more than the actual amount in the contract – to reduce the tax base for themselves, but still earn more money, of course. This is, of course, another tax avoidance manoeuvre, and the adoption of the amendment to the Income Tax Act will increase this type of circumvention.

On top of all this, the wages will also be lower

On top of all this, Golob’s tax reform has concretely cut the wages of absolutely everyone in Slovenia, including the poorest, who had been financially empowered by the Janša government’s reform.

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