We cannot claim that the current government did not warn us in advance that it would cut everyone’s salaries. In the pre-election debates, Golob already clearly announced that he would destroy Janša’s amendment to the Income Tax Act, which promised to significantly lower the labour tax burden for all employees, from the poorest to the richest (in line with the OECD guidance). The fact that salaries were already stagnating or falling before the fateful 1st of January 2023 (which is when Golob’s new Income Tax Act will make our wallets much tighter) is a sign of the current government’s “success” in dealing with the international situation and internal labour market problems. The media, however, want to relativise these fails in very innovative ways.
According to the Slovenian Press Agency, “the average gross salary for October will be higher in real terms on a month-to-month comparison, but lower on the year-to-year comparison.” What does that mean, exactly? Salaries are, of course, not compared from month to month because of the specifics of each month, so the only relevant figure is the year-to-year growth.
According to the Slovenian Press Agency, the average gross salary for October was 2,024.03 euros, up 1.9 percent in nominal terms and 1.1 percent in real terms from September. In a year-to-year comparison, it was up by 7.3 percent in nominal terms and down by 2.4 percent in real terms. Meanwhile, the average net salary was 1,317.60 euros, the Statistical Office of the Republic of Slovenia wrote recently.
The difference is caused by the inflation
The difference between a nominal increase and a real decrease in a year-to-year comparison is, of course, due to the severe inflation we are experiencing. It is, therefore, also clear that the “increase” of 1.9 percent for October (and 1.1 percent in real terms) is mainly due to the fact that global inflation has eased a little in certain sectors (all driven by the implosion of fossil fuel prices). Before that, wages were slightly lower (both in real terms and in nominal terms) for both July and September, with only August (compared to the previous month) seeing a small increase.
It is clear, however, that salaries in Slovenia are not keeping up with inflation pressures, as by all year-to-year indicators, Slovenians will earn significantly less in December 2022 than we did in December 2021. The fact that this government has cut salaries significantly with the Income Tax Act reform and further stirred up the already troubled markets with the announcement of higher taxes on capital gains, does not help, of course.
Slovenian Business Club is preparing an initiative for a review of the constitutionality of the amendment to the Income Tax Act
The Slovenian Business Club (SBC) has announced that it is preparing an initiative to review the constitutionality of the amendment to the Income Tax Act and urged MPs to support it. They have not shared any additional details on the initiative yet.
The amendment to the Income Tax Act, which is expected to come into force on the 1st of January 2023, stipulates that the general credit, which can be claimed by all income tax payers, will not be increased to 5,500 euros as of the 1st of January, but only to 5,000 euros. A further gradual increase to 7,500 euros by 2025 is being phased out.
The additional general deduction will now be granted to taxable persons with a total income of up to 16,000 euros, which is an increase of around 2,280 euros compared to the current law. The tax brackets remain unchanged, but the tax rate in the final, fifth income tax bracket is back to 50 percent, as was the case before the last amendments to the law were adopted in March.
The amendment has been the target of much criticism since it was first drafted. The National Council of the Republic of Slovenia tried to block it with a suspensive veto, but it was subsequently approved once again by the National Assembly. The Slovenian Democratic Party (Slovenska demokratska stranka – SDS) tabled an initiative to call a consultative referendum on the amendment, but it was not supported by the MPs.
The media have already made people accept lower salaries
We are living in a time when the media is the PR extension of the ruling politicians. When salaries are being cut, external reasons for it are always being sought – the energy crisis, the war in Ukraine, inflation… What is never discussed is that Slovenia has surprisingly quickly moved from the group of countries that reign supreme in economic performance rankings to the group of the least successful. In direct comparisons between countries, the global situation is, of course, irrelevant. What matters is how each country is coping with it. And as all the indicators show, the Golob government is coping with the situation extremely badly. Perhaps it should spend less time figuring out how to completely subjugate the media, the judiciary and the police and a little more time dealing with the accumulated economic and financial problems.