The Slovenian worker is among the most heavily taxed in the world, the Organisation for Economic Co-operation and Development – OECD has reportedly found. At a time when the Prime Minister is proclaiming that we do not need lower taxes, otherwise, he would be spending his 35,000-euro-salary (gross, excluding bonuses) on even more stupid things, the government and the people who elected it need to be reminded of how heavily we Slovenians are taxed. This applies to those who receive an average salary as well as to those who receive the highest incomes. In the latter category, Slovenia is just below the top, in an inglorious second place.
While Slovenian Prime Minister Robert Golob proclaims that he really does not need lower taxes because otherwise, he would just have more money to waste on stupid things, the Slovenian workers suffer. Both those who receive an average salary as well as those who receive a below-average income. Those with the highest incomes are leaving because of the absurd tax policy, and it is very difficult to attract other equally qualified workers because Slovenia is simply not worth it. It is too expensive, as the OECD notes.
Every year, the OECD calculates which Member State has the worst tax wedge. The tax wedge is the percentage of a wage that a worker receives but never sees because it is collected by the state in the form of contributions from the employer, the employee, and the income tax. In a report published last year, the tax wedge in Slovenia was as high as 42.9 percent. This ranked us 8th among all OECD members, with 30 countries below us. In the European Union, the average tax wedge on average earnings is 32.2 percent – so more than ten percent lower. But if you think that is bad, continue reading. For those earning above-average incomes, the tax drama quickly turns into a tax horror show.
Our workers are the second most taxed in the world
The most productive workers in Slovenia are the second most taxed in the world! In 2019, the OECD published a report revealing that only Sweden’s workers are ahead of them, with many of the world’s most developed countries below them. The total tax burden that such a worker has to pay on their labour income is a staggering 73 percent. No wonder the most productive workers are emigrating, and it is very difficult to attract foreign workers.
The OECD report compares countries by the sum of taxes paid by workers in the highest income bracket. The report combines different types of taxes, such as income taxes, social contributions paid by the employer or the employee, payroll taxes and consumption taxes. When all these data are combined, the top effective marginal tax rate, which in Slovenia affects the most productive, is as high as 73 percent. Only Sweden is ahead of us; we share second place with Belgium, and below us are a bunch of the world’s most developed countries. This includes neighbouring Austria, which we are so keen to emulate, where the total tax burden of the most productive is 65 percent. In Switzerland, the country we looked up to when we gained our independence, it is only 46 percent. Bulgaria, however, pays the lowest taxes.
Why is Slovenia remaining a country of low added value?
One of the biggest problems that Slovenia is facing is its unfavourable tax environment. This has a negative impact on all employees, both those with the lowest incomes and those with the highest. For those with the lowest incomes, the issue of the tax rate is a matter of survival. In Slovenia, approximately 211,000 people live below the poverty line. This is a group of people whose low income makes them extremely vulnerable to changes in consumer prices. The Janša reform government tried to relieve these people of the tax burden with an amendment to the Income Tax Act, which, when it comes into full effect in 2025, would save them almost one whole additional minimum wage. In the Robert Golob era, however, they are facing rising prices for basic necessities, which Golob is not even addressing, and even a reduced salary, which they are likely to receive when his proposed tax reform is adopted in the National Assembly. That is because, under the new legislation, the minimum wage will no longer be adjusted in line with inflation. You can read more about it in this article: This Is How Much Lower Your Salary Will Be Thanks To The Government Of Robert Golob – Even Those With The Lowest Wages Won’t Escape It!
Low wages are due to low competitiveness
Slovenia’s unfavourable tax legislation continues to make it unattractive for investors to invest in high-value-added jobs in Slovenia. Not only that, but many of the best-qualified people we have are leaving Slovenia for higher wages abroad, where the tax burden is also lower (in most cases). Only when there are more jobs of this kind in Slovenia will there be a noticeable improvement in the standard of living. “The new tax legislation proposal goes in the wrong direction. The previous regime was more appropriate because it reduced the tax burden on labour since, in Slovenia, we have trouble staying competitive. We are not succeeding in any way in becoming an attractive location for jobs with higher added value and higher wages because, as far as the tax burden is concerned, we are too expensive. This anti-reform that is now underway is another step in the wrong direction; it is definitely bad for the long-term development of Slovenia,” professor Anže Burger recently explained the new government’s legislation for our media outlet.
Andrej Žitnik
