During the previous government’s term, we could often hear the opposition and even the trade unions complaining and fearmongering that we would lose between 700 million and 800 million euros of budget money because of the amendment to the Income Tax Act, which raised wages for everyone. But today, when it comes to the cost of the so-called wage reform (although the reform in question does not deserve that title) in the public sector, the criticism of those who were most critical at the time is “surprisingly” absent, even though it is estimated to cost as much as 1.4 billion euros over a four-year period.
When the Janez Janša government wanted to adopt the income tax amendment, it referred to the warnings of a number of international institutions, which have been warning Slovenia for a long time that salaries in Slovenia are overtaxed. As is well known, the high burden on labour income puts pressure on labour costs themselves, thus weakening the international competitiveness of companies, which in turn has a direct impact on the country’s economic strength. The burden on labour also has a direct impact on the income a worker receives for doing his or her job. Since it is the salary that constitutes the main income for living, the burden naturally also affects the savings themselves. The former government was well aware of all this. But despite these facts, the current government, when it came into office, put the brakes on minor wage reforms, and now we keep hearing that salaries are overtaxed.
When the previous government adopted the income tax reform, which relieved the burden on labour and consequently increased net salaries for everyone, there were fears in the opposition ranks that this would create a “hole” in the budget of between 700 and 800 million euros. As a sign of criticism, they claimed that this measure would lead to the collapse of public finance, which would result in the end of the public education and healthcare systems.
It turned out that the fearmongering was completely unnecessary. Income tax inflows even increased by 4.3 percent in 2022 compared to the year before. This was driven by higher employment, promotions, and wage agreements in the public sector, as well as wage growth in the private sector. Although the income tax reform slightly reduced revenues, it is clear that the budget did not suffer an unsustainable deficit. More importantly, income tax inflows increased further.
If the income tax amendment of the Janša government had been maintained, an individual earning the minimum wage would have received 640 euros more per year in 2025. An average wage earner would earn 1,000 euros more per year. However, in the case of the ‘reform’ being introduced by the Golob government, there will be significantly higher costs and, on top of that, it will only affect public sector wages.
In a statement on Friday, Prime Minister Robert Golob described the sufficient number of signatures of collective agreements or annexes to contracts and agreements, which are the basis for the reform of the wage system, as a historic feat and the crowning achievement of the negotiations. In a recent interview with Radio Ognjišče, the leader of the Slovenian Democratic Party (Slovenska demokratska stranka – SDS), Janez Janša, pointed out that this is not a reform but a mere correction. Referring to the amount of funds that will be needed to raise public sector wages, he pointed out that the bulk of the financial burden for the said reform will be carried over to the mandate of the next government. This, he said, would jeopardise public finances, especially as the economy cools.
Judging by the enthusiasm generated by Friday’s contribution of sufficient signatures from the trade unions, the Golob government is not bothered by the fact that the budget might need more funds and that a crisis is looming. It is hard to believe that in the next term, the same set of parties will hold the reins again, so everything will be thrown on the shoulders of those who come to power after them.
A. H.
