By: Gal Kovač (Nova24tv.si)
The government has announced new tax burdens. It speaks most openly about real estate taxation. According to predictions, not only second or third properties will be taxed, but all, progressively and according to their value. It is a little coyer about additional labour taxation. It wrapped these up in vague announcements of the simplification of tax legislation, but the easing of work, which was announced by the Prime Minister as well as the president of the Social Democrats, probably will not happen, quite the opposite. “It cannot be claimed that wages will be less burdened,” said the State Secretary from the Ministry of Finance at the press conference. We asked economics professor and former minister Janez Šusteršič for a comment, who says that property taxation will be largely ineffective. At the same time, he misses the fact that the government has not spoken about social contributions, even though they limit wages the most.
“It seems to me that the main problem is that there was not a single word about social contributions, even though this is what puts the greatest burden on salaries or work in general. The government began its mandate by increasing the workload by amending the Income Tax Act. That is why it is very hard to believe that she will want to relieve the burden in the next step,” commented Šušteršič.
Let us remind you that the government announced some time ago that it will present a tax reform in mid-March. March came and the coalition summit in the middle of the month. At the end of the press conference, Slovenia expected solutions, but there were none, only predictions, similar to the health reform. But the predictions are also dark. Namely, the government notes the “increasing needs of society”, which will be met with new burdens on the population.
They have proposed some ideas about the actual way they intend to do this, but the bottom line is that they are still vague. It is not yet entirely clear to them how exactly they plan to expand the state budget. The largest contribution to taxpayers’ wallets will be made through property taxation or real estate. If some still had hope that only “additional” real estate, i.e., weekend homes or apartments, would be taxed, that hope was dashed yesterday when the government announced that homes would be taxed progressively. In other words, all real estate will be taxed. They are also considering other property taxes but have yet to reveal which ones. They are mainly thinking about forms of taxation against which citizens would not be able to defend themselves, so they excluded the taxation of bank deposits, because in this case the money would just “move under the mattresses”. Dr Šušterič commented on the announced property taxation as follows: As far as property is concerned, many things are still unclear for the time being. The summaries of the government’s forecasts contradict each other in some places, which means that apparently the plans have not yet been presented very clearly. Regarding real estate taxation, we are somewhere on the EU average, but then there is the taxation of other assets, where the minister said that it is not possible to collect much, which is true. This plan, that we will collect a lot of money by taxing real estate, is not realistic.
As for whether the government will tax cars now, Šusteršič answered: “Perhaps it will also tackle this. There are countries that have or still tax art paintings and fur coats, as was the case in Germany for a while. The only country that still tries to do this in the EU today is Spain. I see two problems, firstly, there are no records of this property, cars yet, but not the other. Second, why tax assets that have a basic social security function that you take care of yourself? Saving wealth is the basis of reinvestment in the economy, so… if we spend everything we have, we will have no wealth and no development. Spending has never generated development.”
Šusteršič: This is not credible
The second part of the government announcements touched on labour taxation. As far as it was understood, the authorities will first start changing the way of taxing work. They mentioned the possibility of “net taxation”, which, according to their explanations, should mean that there will be a shift from the system of tax reliefs to tax deductions. In practice, this should mean that the government would also tax expenses that have not existed so far, i.e., Christmas bonus, holiday pay, travel expenses, and social transfers. The predictions of the Prime Minister Robert Golob and the President of the Social Democrats Tanja Fajon seem less and less likely. At least that much can be inferred from the above-mentioned statement of State Secretary Božič from the Minister of Finance, who admits that the necessary calculations for this have not yet been made. “We know what kind of capture we would like to have, everything else will be a matter of discussion,” said Božič.
When asked if it is still possible for the workload to be reduced, Šusteršič commented: “If she thinks that the workload is necessary, then why did she decide to increase the workload last year? If they are serious about relief, why did they not leave the relief that was already legislated? This is how they first burdened people, and then explained that we will now relieve them. This is not credible.”
The system of tax deductions supports
As for the announced changes to the Income Tax Act, i.e., the announced taxation of social transfers, Šušteršič is somewhat less pessimistic. He said that he supports the system of tax deductions: “The conceptual basis, as far as the deduction is concerned, can also be interesting and good, but it can lead to both relief and additional burden.” He added: “Of course, this is a very big change, especially if it will be possible to include transport to work, vacations, so here it is possible to relieve the burden, but of course it is necessary to define these things very precisely and recalculate.”
Šusteršič explains that it was right to include all social benefits in the income tax base: “We know of situations where someone can earn more with social benefits than by working for the minimum wage. If that is not taxed, then we tell people that it is not worth working. […] If someone receives so many social transfers that they already exceed the minimum wage, they should also pay income tax. […] If people start paying taxes from social transfers, the state should also adjust the amount and conditions for these social transfers so that they do not exceed the minimum income that is not subject to income tax.”
If Šusteršič were in the position of having to predict whether the tax burden would increase or decrease, he said: “We cannot know what the result will be, but based on what the government has shown so far with its actions, I find it hard to believe that that there will be some serious relief.”
The government is announcing a public debate on tax changes, and the first changes to the tax burden on labour are expected next year. Changes to property taxation are expected to be adopted a year later.