By: Andrej Žitnik (Nova24tv.si)
The mantra of Golob’s government is spending public money with such intensity as if tomorrow will never come. They have signed billion-dollar guarantees for failed state-owned energy companies, made agreements with the loudest public sector unions (outside of general reform), rewarded their “street” with record funding for non-governmental organisations and a record budget for the Ministry of Culture. They intend to establish a black hole of taxpayer money that will officially operate as an airline, and there are even talks of acquiring Mercator. It is no wonder that the budget deficit continues to increase from quarter to quarter. Waiting times in healthcare are getting longer, not shorter. The time when fiscal rules will have to be considered again is rapidly approaching. Economic cycles are long, but the first bills are already being presented to Golob’s government.
The Fiscal Council reports that in the first five months of this year, the total deficit was higher by 209 million euros compared to the same period last year. Excluding intervention measures, the budget would have recorded a surplus, but it was smaller by 293 million euros compared to the surplus in the first five months of last year, which amounted to 531 million euros.
It is worth remembering that last year, the opposition parties of the KUL coalition predicted catastrophic scenarios with the introduction of the new income tax legislation by Janša’s government, which increased wages for all Slovenians. In reality, the revenues to the budget even increased at that time (as predicted by serious economists since lower tax burdens on labour lead to greater economic activity and, consequently, higher taxes).
The Fiscal Council emphasises that the larger deficit is primarily due to lower revenue growth compared to the same period last year, mainly resulting from a decrease in corporate income tax revenues due to a high base from last year. Additionally, there has been a higher growth in labour costs, which is a result of the agreement reached in the fall on wage increases. It should be noted that the fall agreements with public sector unions were implemented as a temporary solution before the full reform of the public sector wage system, which is expected to incur additional billion in expenses.
More revenue from excise taxes, but at our expense
The growth of value-added tax (VAT) revenues, which started to stabilise in the second half of last year, has remained at a lower level in recent months. According to the Fiscal Council’s assessment, this slowdown is partly due to the high base effect and the reduced VAT rate for energy products, as well as increased uncertainty and high inflation. Revenue growth from excise taxes has strengthened in recent months due to increases in excise duties on energy and tobacco products. However, the price to pay for this is significantly higher fuel prices compared to neighbouring Croatia, where a full tank of diesel can be obtained for more than 10 euros cheaper than in Slovenia, which further fuels inflation and depreciation of wages and pensions.
The Slovenian government still regulates fuel prices, even though they have long dropped from record levels during the peak of the conflict in Ukraine. Additionally, the government has taken advantage of the decrease in energy prices on global markets to increase excise duties on fossil fuels, alongside the tax on the transition to electric vehicles, which is paid by everyone for the wealthy who can afford such expensive vehicles.
Paradox: Higher deficit, higher taxes
It should be noted that since January 1st, 2023, the government has deducted a portion of the salary it previously provided through Janša’s income tax reform from all citizens. Furthermore, the tax on corporate profits and the tax on real estate rentals have increased (significantly, revenue from corporate entities has fallen by 15 percent). We find ourselves in a paradoxical situation where we are paying higher taxes but receiving less in return every day as the budget deficit grows. The government argues that part of the budget hole should be attributed to anti-inflationary measures, but more significant are the decreasing revenues despite higher taxes. These are the initial outlines of Slovenia’s economic situation under the far-left government of Robert Golob, which is building its policy on high taxes and high spending while reducing the quality of public services (despite higher taxes, there is not enough funding for the highway police, who have empirically proven to reduce the number of serious traffic accidents and congestion on the entire highway network).