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Economic Round Table: Slovenia Needs Legal And Tax Predictability

“Slovenia needs predictable and stable public finances,” and above all, “legal and fiscal predictability, which is crucial for the functioning of an orderly state.” This was the consensus of the participants at the expert consultation entitled Expectations of the New Tax Reform, who agreed that Slovenia needs to restructure its tax reform and that it is stagnating due to state interventions.

Slovenia would like to be among the best countries, but instead of stability, it offers an unpredictable business and tax environment with a tendency to change for the worse. Slovenian companies, especially start-ups, are fleeing en masse to friendlier environments, and foreign investment is declining. Domestic and foreign professionals are being driven away by high taxes and contributions. What lies ahead, and where do experts see solutions?

The economy does not want to avoid paying taxes, but it does want a fair and proportionate tax system that keeps businesses competitive and prioritises tax revenues for development, agreed experts at the recent Economic Round Table consultation in Ljubljana. They, therefore, believe that tax reform must be well thought out and ensure stability. According to Peter Wostner of the Slovenian Institute of Macroeconomic Analysis and Development (UMAR), real productivity growth is stagnating. He sees market cleansing or a shift towards more productive activities as one way of boosting productivity, but this is being held back by “state interventions”.

Mrak: I would rather see no tax reform, as it would do more harm than good

“The economy is cooling. This decade could be the lowest in terms of economic growth. The situation is tightening, and quick decisions – including on tax reform – cannot be good. Serious tax reform must also be linked to pension reform,” said Mojmir Mrak from the Faculty of Economics in Ljubljana. “It is not possible to prepare a serious tax reform in three months, as the Prime Minister announced,” he stressed. “In the current situation, I would rather see no tax reform, as it would do more harm than good,” he said.

The government is taking partial and reckless measures

According to Vesna Nahtigal, Director-General of the Chamber of Commerce and Industry of Slovenia, the current government has done nothing to ease the burden on the economy, with the exception of mitigating the energy crisis. “The government lacks a broader picture and a clear strategy and is solving problems with partial measures that are not well thought out,” she said. She called for a tax reform aimed at relieving the burden on the Slovenian economy. “This is the best way to ensure the long-term sustainability of public finances,” she said.

According to Davorin Kračun, President of the Fiscal Council, the high expectations of various stakeholders are a serious problem, after the state has given them many incentives and benefits in the past. “It is difficult to give up benefits,” he said. Looser fiscal rules do not generally benefit smaller or weaker countries, he said. Above all, the fiscal system is and will have to be able to provide credible medium-term planning.

“When we talk about fiscal reform, we are not talking about cutting taxes, but restructuring them. One of the problems: today people are mobile, we work remotely for global companies, and the burden on the most educated people we need is high,” Wostner stressed.

Matej Avbelj from the European Faculty of Law of the New University pointed to the huge hidden tax if the state fails to ensure fair and efficient dispute resolution in society. “All legislation is being passed under the urgent legislative procedure without any real reason, without taking into account the opinion of the Legislative and Legal Service of the National Assembly… This leads to a situation: if the authorities are allowed to behave like this, why should we follow the rules? This is not good if we want to function as a well-ordered country. Slovenia’s tax problems are the result of wider systemic problems. One of these is a dysfunctional parliament,” he believes.

Ivan Simič, Director of the company Simič & Partners, which is also a tax consultancy company, pointed to the increasingly visible consequences of Slovenia’s non-competitiveness in the tax area compared to neighbouring countries. Instead of tax reform, he believes that small-scale changes could be made at the moment to address acute but solvable problems.

“I admire politicians who have the courage to come on television to explain that they have abolished the supplementary health insurance contribution. I am waiting for the reaction of the people who will get a 35-euro pay cut in January,” Simič remarked.

According to Tjaša Redek from the Faculty of Economics in Ljubljana, politicians should focus on developing strategies to increase productivity and value added. “We can only increase wages by creating more,” she stressed. Higher value added, she said, would be felt in all areas, but for the general public, probably the most tangible benefit would be more modern healthcare.

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