STA, 28 March, 2019 - The government adopted on Thursday legislative changes raising the threshold for exemption of annual holiday allowance from income tax and social security contributions. The measure will be applied this year, but only for holiday allowance up to the average national monthly wage.

"We've kept the promise and adopted the changes to the laws on pension and disability insurance and on income tax to exempt the holiday allowance of taxes as early as in 2019," the government wrote on Twitter.

"Every euro that employers spend on holiday allowance will be transferred to the employees, the state has given up income tax and contributions," Finance Minister Andrej Bertoncelj said.

Income tax and social security contributions will still have to be paid on the amount of holiday allowance exceeding the average monthly wage. At the moment, holiday allowance in the amount of 70% of the average monthly wages is exempt.

Slovenian employers are required by law to pay holiday allowance, while taxation in practice puts a soft ceiling on the amounts since taxes eat away at a large share of any allowance beyond what is tax exempt.

The benchmark will be data by Slovenia's Statistics Office, which publishes wage statistics on a monthly basis.

The latest available data is for January, when the average monthly gross wage stood at 1,729 euro and the average net wage at 1,116 euro.

The measure is designed to cut labour taxes and raise the disposable income of the workers who receive higher annual holiday allowance than the minimum wage - which is the lowest amount of holiday allowance the employer can pay out.

The government says this should improve Slovenia's competitive advantage, stimulate consumption and encourage companies to pay out more generous holiday allowances.

This is the first in a series of tax measures the government announced recently.

Last week, the Economic and Social Council, the country's main social dialogue forum, agreed this measure should be implemented as soon as possible, whereas the other measures will be subject to negotiations.

Bertoncelj said the government had kept its promise to sort this out as soon as possible. He expects the National Assembly will rush the bill as well since the government has proposed it be fast-tracked.

The Finance Ministry expects that the bill will reduce tax revenue by roughly EUR 90m annually, while the contributions shortfall is expected to amount to no more than EUR 2.4m.

All our stories on taxes in Slovenia are here

STA, 5 March 2019 - Slovenian chief financial officers (CFOs) expect a somewhat less positive outlook of the state of the economy this year, and point to operational cost management and lack of trained workers as the main risks to business, according to the 2019 survey by consultancy services provider Deloitte Slovenija.

"The main findings of the survey, which has been carried out for the 10th time in Central Europe and for the 8th time in Slovenia, are that CFOs expect growth to slow down.

"In Slovenia, they stressed that an unstable fiscal or legislative environment in general makes their business highly uncertain," Deloitte Slovenija director Barbara Žibret Kralj said as she presented the survey in Ljubljana on Tuesday.

With the minimum wage to rise in Slovenia, Slovenian CFOs expect labour costs to rise the most among all costs. And just like in 2018, they point to hiring adequately trained staff as one of the biggest problems.

The CFOs also expect the unemployment rate to rise, and see banks as the most popular lenders, with internal sources of funding also playing an important role.

Mojca Osolnik Videmšek from the Gorenjska Banka bank said the economy was deeply in an investment cycle, so the need for banks as sources of funds, also because of low interest rates, was there to stay.

This year's survey also focused on artificial intelligence.

More than three-quarters of CFOs in Central Europe and around 40% in Slovenia say their companies lack the support of artificial intelligence in decision-making processes.

In Slovenia, two-thirds of companies say artificial intelligence is important for the development of financial services, but are poorly prepared for implementation.

Slovenian CFOs also believe artificial intelligence will create many jobs in the medium term, but a quarter maintain it will make many jobs obsolete in the long run.

While firms compete globally to attract IT experts, Juri Sidorovič from Deloitte said directors not giving clear instructions and not setting goals was sometimes a problem.

"The problem is what a goal is, what we want, what can be modernised, what can be robotised," he stressed.

Deloitte Slovenija also commented on the tax reform presented last week, with Andreja Škofič Klanjšček saying it was more of a "correction since it brings no major changes".

She welcomed the planned changes to personal income tax to finally take the pressure off of those in the middle of the income scale, and exempting holiday allowance from all taxes.

However, Škofič Klanjšček is worried about the planned rise in corporate income tax from 19% to 22% and about the minimum taxation of 5% of all legal entities.

The participants of the news conference said raising the corporate income tax "is a bad signal to attract investors".

They also complained about the lack of a strategy in which the government would set goals to be achieved with tax changes.

Sidorovič said the state could for instance decided to promote IT and then take measures to implement such a strategy.

STA, 1 March 2019 - Peter Vilfan resigned as state secretary in charge of sports at the prime minister's office on Friday, following over a month of speculation that he evaded taxes. In his resignation, Vilfan once again denied being audited by the Financial Administration (FURS) or being issued a fine.

Prime Minister Marjan Šarec responded by saying that he accepted Vilfan's resignation.

In mid-January news portal Požareport said that Vilfan, a former basketball player, had been receiving sizeable payments from two TV stations for serving as basketball commentator.

Požareport said that the public TV Slovenija and commercial media company ProPlus paid the fees to Vilfan's own sports association and that he cooked the books to avoid tens of thousands of euro in taxes.

Vilfan on the other hand said that he had been paid about EUR 1,500 a month, while the figures circulated in the public were much higher.

Moreover, in late February the weekly Reporter said that Vilfan had been fined by FURS, which he denied immediately.

"Let me assure the public that neither I nor my association have been in any offence proceedings, and we have not been issued any decision or fine by FURS," Vilfan said in his letter of resignation forwarded to the media by the Pensioners' Party (DeSUS), of which he is a member.

In his response last week, Vilfan said that "the association filed a report on its own with FURS" and that they "are jointly examining a period of several years for possible accounting errors or irregularities".

DeSUS confirmed today that the review was concluded on Monday and the certain accounting irregularities had been discovered.

The party's president Karl Erjavec said he regretted the developments but respected Vilfan's decision.

Vilfan announced he was leaving politics for good. He was first elected to parliament as a member of Positive Slovenija of Ljubljana Mayor Zoran Janković in 2011, defecting to the Alenka Bratušek Party (SAB) after a split in 2014.

After being reelected MP in 2014, he joined the Pensioners' Party (DeSUS) in 2015, serving out his term until 2018 but he did not get re-elected in the June 2018 election. Instead, he was appointed state secretary at the PM's office.

He also commented matches when he served as an MP between 2011 and 2018, having being granted the permit by parliament.

A member of the Yugoslav national team that won the 1978 FIBA World Championship, Vilfan commented the 2017 EuroBasket matches for ProPlus channels POP TV and Kanal A under a similar arrangement as with RTV Slovenija.

Vilfan's resignation comes two days after Šarec accepted the resignation of Environment Minister Jure Leben, the third member of his cabinet leaving the government which was sworn in in September 2018.

Mladina: Proposed tax reform would mainly benefit the rich

STA, 1 March 2019 - The latest editorial of the left-leaning weekly Mladina tears apart the Finance Ministry's tax reform proposal as yet another taxation tweak to primarily benefits the rich.

Only two years have passed since the last changes that brought the biggest tax burden reduction and greatest gains for those who already have high wages.

While Prime Minister Marjan Šarec now stands to gain almost EUR 1,000 a year, his predecessor Miro Carar saw his wage rise by EUR 2,000 net at the annual level or to EUR 3,457 net a month, effective on 1 January 2017.

The argument keeps repeating - "we are doing this because of those who are the most productive", editor-in-chief Grega Repovž says, labelling this as despicable deceit by those working for the benefit of their own class.

It is true that high wages are taxed more in Slovenia, but on the other hand property is not subject to any serious taxation and the bulk of the income of the wealthiest stems from property.

Meanwhile, the taxation of the average wages of those in whose name the wealthiest would get even more after this reform is comparable to that in similar countries in Europe and is for instance lower than in Austria, Repovž says in the editorial entitled New Tax Cuts for the Rich.

At the same, the government is shying away from a real estate tax or from heavier taxation of those letting out several apartments, while it has also avoided reforming the compulsory health insurance system that continues to channel large sums of public money to private insurers.

This is an arrogant and offensive tax reform proposal that benefits the wealthy and should be withdrawn, Repovž says, adding PM Šarec dismissed the wrong minister this week.

Demokracija: Why does media ignore warnings on government spending?

STA, 28 February 2019 - In its latest commentary, the right-leaning weekly Demokracija is flabbergasted by the fact that a majority of the Slovenian media dedicated almost no attention to the warnings from the Fiscal Council that the general government expenditure planned for 2019 should be EUR 270m lower.

The warning about the need for the country to preserve a structural balance in compliance with the fiscal rule was buried quickly, ending up somewhere "on the dark side of the internet", editor-in-chief Jože Biščak says.

Is the expansive fiscal policy, which could cause a headache in the autumn, really a marginal topic, he wonders. It obviously is, as the media are busy "inflating the popularity of the prime minister," he adds in the commentary entitled It's Good to Be Marjan Šarec.

Šarec is really happy because, as the global economic situation is getting increasingly unpredictable, and forecasts more pessimistic than optimistic, the media do not bother him with questions about what to do if the economic growth happens to be lower than expected.

The fear of the 2008 crisis repeating has made the smart countries (Germany, Norway) start accumulating surpluses and creating reserves, while others are reducing general government debt (Estonia, the Czech Republic).

The only solution for the Slovenian government, if it wants to keep the public sector in the current size and meet the obligations given to the sector "either blindfolded or drunk on power", will be to increase the already high taxes.

The problem is not in taxes themselves, but what you get in return. According to an analysis by the Quality of Government Institute, Slovenia belongs to the countries which spend much, while giving back little to the citizens.

All our posts in this series can be found here

STA, 26 February 2019 - The Finance Ministry has drawn up changes to tax legislation, reducing taxes on labour on the one hand and increasing the capital tax on the other. It hopes that lower taxes on labour will boost spending and economic growth. Most of the changes would step into force in 2020.

Finance Minister Andrej Bertoncelj told the press in Ljubljana on Tuesday that the main goal of the reform was to increase net revenue of those employed to make the Slovenian labour market more competitive internationally.

This is to be achieved with changes to income tax brackets. The draft changes envisage moving the brackets up, reducing the tax rate for certain brackets, and increasing tax incentives.

The ministry expects this to have the biggest effect on the third income bracket, which the minister said affected the "most productive" part of the society. He said both the proposals of employers and trade unions had been taken into account in the changes.

If only the general tax incentive is taken into account, the net revenue of employees with minimum wage would go up by EUR 32, of those receiving average wage by EUR 144 and of those receiving two average wages by EUR 670 a year.

The taxes on the annual holiday allowance would be reduced. As so far, the allowance in the amount of up to average gross pay would not be taxed, but under the new proposal no social contributions would need to be paid from it either. Currently only the allowance that matches 70% of the average gross pay is exempt from contributions.

This means that the employee would receive the entire amount paid out by the company if it did not exceed average gross pay. The ministry would like this to be implemented this year.

For performance bonuses, the ceiling for being except from tax, which currently stands at 100% of average gross pay, would be raised to 150% in 2020. In 2021, it would be pushed to 175% and in 2022 to 200% of average gross pay.

The ministry believes this would cut the budget revenue by some EUR 270m a year. This is to be offset by an increase in corporate tax in 2020, 2021 and 2022 by one percentage point from 19% to 22%.

Current tax incentives for R&D investment would be preserved, but the effective tax rate for a company could not be lower than 5%. The average effective tax rate currently stands between 12% and 13%, Bertoncelj said.

Changes to capital gains tax

The schedular taxation of certain revenue (capital tax, interest and dividends, and revenue from rents) would stay the same, while the tax rate would be raised from 25% to 30%.

Capital gains tax would still be lowered with time, but to a much lesser extent. While currently it drops to 15% after five years of ownership, to 10% after 10 years, to 5% after 15 years and to 0% after 20 years, now it would stand at 30% for the first 10 years and remain at 15% after 10 years.

In total, these changes would increase budget revenue by EUR 110m a year. The remaining EUR 160m needed to cover the gap would be brought in through more efficient tax collection, and the fight against tax fraud, grey economy and social fraud.

According to the ministry, this is how much measures in these fields brought in last year.

Bertoncelj said he had already presented the blueprint of the tax reform to the coalition informally and was currently presenting it to deputy groups. The coalition is to discuss the proposal at its meeting on 12 March.

The changes are also to be debated by the Economic and Social Council, an industrial relations forum.

The ZSSS confederation of trade unions as well as the Chamber of Craft and Small Business (OZS) and the Chamber of Commerce and Industry (GZS) expressed satisfaction with the ministry's proposal.

In its response the ZSSS noted that it had been fighting for lower labour taxes and higher taxation for the capital, while the OZS underlined it was against a higher corporate income tax. A similar position was also voiced by the GZS.

STA, 26 February 2019 - Frans Timmermans, the lead candidate of the Party of European Socialists (PES) for president of the European Commission, argued in an interview with the STA that the European Commission had been "crystal clear" in its reaction to the Slovenian-Croatian border dispute. He also warned against the instrumentalisation of history by politicians.

The first vice-president of the European Commission, who is to visit Slovenia on Thursday as part of the EU election campaign, does not share the view that the European Commission allowed politics to get in the way of law in the case of Croatia's refusal to implement the border arbitration award.

"Thank you for this open and very unbiased question... First of all, this is a bilateral matter. Second, we've been very clear the award needs to be implemented," the Dutch politicians said, arguing that Slovenia and Croatia could "not discharge responsibility and say the Commission should resolve this".

"This is not our role," he added, also dismissing claims about the Commission completely ignoring the opinion of its legal service that confirmed a link between the arbitration award and EU law.

"This is an oversimplification. The link is that if you don't have clarity on the border, you have problems with EU policies, such as fisheries and other policies. This is the link with EU law. These are the consequences of the award not being implemented and the parties should start implementing the award."

"The Commission has been crystal clear about that and I really don't understand why our position is not understood."

Commenting on the state of social democracy in Europe, Timmermans said he does not "believe this doom and gloom about social democracy".

"There's a more general point that the traditional popular parties on the centre left and centre right are both no longer the huge parties they used to be. It's not just a problem of social democracy but of the European People's Party (EPP) as well. So we are not alone in that.

"I want to warn about the temptation in both, centre left and centre right, to think that you can regain your position by going to the extremes. I don't agree with that analysis because if you want to go to the extremes there's already somebody there and they are the original.

"Or you stay true to your own soul and you stay centre left and that's what we are. Looking at Europe today, the central left is staying more in the course of the lines we believe in than the central right which is courting to the extreme right everywhere," Timmermans said, adding he was constantly warning the EPP against getting its soul changed by extremes.

Tajani wrong to rewrite history

Asked in this context about the statements by European Parliament President Antonio Tajani that were understood as Italy's territorial claims against Slovenia and Croatia, Timmermans said he hates it when politicians start instrumentalising history or rewriting history.

"And this is what Tajani did. I disagree with him fundamentally. I'm not asking for his resignation but I want to make it clear that I strongly disagree with him.

"As Churchill put it, the history of Europe is written by rivers of blood and we overcame rivers of blood after the Second World War...Please, please leave history to the historians, they deserve to be writing history not the politicians."

Timmermans, who said he was aiming for the post of European Commission president and had, contrary to rumours in Brussels, "no interest whatsoever in being the EU's high representatives for foreign affairs", also elaborated on his call for a new social contract for Europe.

Tech firms must be taxed

"We're in the fourth industrial revolution, everything is changing, which means the relationship between people and states also needs to change and adopt to this new reality," he said.

People across Europe feel "that our society is not fair for many reasons", he said, listing fairer taxation as the first step towards changing this.

"It's completely inadmissible that the biggest corporations in the world would make profits here but don't pay a single euro of tax. You don't allow your local café to live like that, so why would you let Google, Facebook or Amazon do it?"

Other necessary steps listed by Timmermans include fair minimum wages in all members state, EU legislation that would secure fair job contracts for the young, and affordable housing.

STA, 19 February 2019 - Contrary to previous announcements, the Finance Ministry has now said it will be impossible to introduce the new real estate tax in 2020 as planned because data on some types of property remain faulty.

"Even though much has been done in recent years, not all the registries have been put in order to such an extent as to remove obstacles to the introduction of the real estate tax," the ministry told the STA.

The new tax, which is to replace the current levy for the use of building land, property tax and forest road fee, has been years in the making and put off several times because of its unpopularity.

An earlier attempt at introducing such a tax failed in 2014 after the Constitutional Court quashed the property appraisal act, which was to underpin the new system.

"The biggest obstacle to the real estate tax at the moment is that data on actual use of land for public roads and public railway infrastructure will probably not be available in time," the ministry said.

It specified that the most problematic issue was data on municipal public roads.

One problem could be if such plots were to be exempt from tax, considering that a large section of such infrastructure is still located on privately held land.

The Finance Ministry has been encouraging municipalities to do their part of the job in terms of these data, because receipts from the real estate tax would be their source of revenue.

"All obstacles to introducing the real estate tax will have been removed once these data have been put in order as well," the ministry said, adding that this was the job of the ministries of environment and infrastructure.

Earlier this month, the newspaper Dnevnik reported that compiling a census of 1,200 kilometres of rail tracks and 39,000 kilometres of state and municipal roads did not begin until recently, mainly due to delays at the Infrastructure Ministry.

The legislation for the registering of the actual use of land for public roads and railway infrastructure was adopted in February 2018 and the appertaining rules only just before the end of 2018.

The census of plots of land with state roads is to be completed by June, but the problem is said to be the 32,000 kilometres of local roads which local officials do not think will be completed in less than two to three years.

All our stories on real estate in Slovenia can be found here

STA, 4 February 2019 - Calls for structural reforms, in particular lower taxes and a more flexible market, were in the centre of a Slovenian Business Club (SBC)-sponsored meeting in Postojna, which featured some of Slovenia's top business and state officials. Prime Minister Marjan Šarec promised changes, while also noting the importance of preserving the welfare state.

Šarec told the meeting, which brought together around 300 successful entrepreneurs and several cabinet members, that the government would draft a package of measures before the end of the year, "measures that you've perhaps been wishing to see for a while".

He expects the measures will again cause a storm in the public, but "there is no action without a reaction".

Šarec, however, went on to stress that the welfare state was also needed, "since things that it provides for everybody - such as education, healthcare and other services - are not unimportant".

Šarec, who acknowledged the economy was slowing down but argued it was too early to speak of a crisis, rejected comparisons with Switzerland, which is being looked to at the meeting for inspiration on how to increase added value.

"If we continue to wonder how to become another Switzerland or somebody else, we'll probably fail to meet the desired goals and results. No system has only pluses and no system has only minuses," the prime minister said.

Marjan Batagelj, the chairman and majority owner of Postojnska Jama, the operator of Postojna Cave, said it was time for concrete measures, calling for lower taxation of wages and greater labour flexibility.

"We must not become a tax island. All countries around us are reducing taxes and we need to make sure our business environment is competitive," said Batagelj, while at the same time calling for a more effective education system.

He pointed to Switzerland as an example of a country where politics is constantly coordinating its actions with business.

This was echoed by Heinz Karrrer, the president of the biggest economic organisation in Switzerland, Economiesuisse, who said politics should listen very carefully to the needs of business when it comes to creating jobs.

The afternoon part of the meeting, which also featured Economy Minister Zdravko Počivalšek, Finance Minister Andrej Bertoncelj and Labour, Family, Social Affairs and Equal Opportunities Minister Ksenija Klampfer, looked in more detail at the forthcoming measures in Slovenia.

Bertoncej said the government would present measures coming as part of "comprehensive tax optimisation" to social partners within a month.

He called for an all-encompassing review, noting that while labour was taxed heavily in Slovenia, the tax burdens on capital were lighter than in other countries.

Promising that the business environment would remain predictable, Bertoncej also announced a gradual introduction of measures, with the biggest batch expected in 2019, to be followed by individual measures in 2020 and 2021.

Among concrete measures being mulled by the government, he mentioned easing taxation on the holiday allowance, changes to income tax brackets, to general income tax allowance, as well as to the corporate tax rate.

Bertoncelj, who also sees reserves as regards the effectiveness of the public sector, added that macroeconomic stability would be the priority focus of the ministry.

Economy Minister Počivalšek highlighted labour force shortages as a key factor undermining growth, suggesting that focusing on raising the average wage would have been better than the recent focus on the minimum wage.

He added that "a step forward" could also be possible when it comes to expanding possibilities to lay off unmotivated staff.

Labour Minister Klampfer also called for reducing the tax burden on labour "across the entire vertical", while stressing the need for social dialogue.

Mladina: Low Salaries in Slovenia are Because of Company Policies, Not Taxes

STA, 11 January 2019 - The weekly Mladina says that wealthy entrepreneurs are preparing the battle field ahead of a tax reform planned by the government. They are narrating a story of an engineer who is paid poorly due to high taxes and decides to leave the country to work abroad where taxes are lower. This, as it turns out, is nothing but a myth, Mladina says.

Under the headline “Abused Engineers”, the latest editorial of the left-leaning magazine says that engineers do make less in Slovenia than they would, for example, in Austria.

But this is not because of higher taxes but because company owners, Mladina specifically points to the owner of a successful exhaust maker Igor Akrapovič, do not give them higher pay.

Moreover, engineers are actually paid far less than what the entrepreneurs claim, the paper says, suggesting the bosses are actually talking about themselves.

In fact, income taxes for what engineers actually make in Slovenia are lower than in Austria. Only if they were paid as much as company owners claim they are, would the income tax be higher, a Mladina journalist has found.

He also busted the myth that engineers are leaving the country, providing numbers that only 70 engineers left Slovenia between 2012 and 2017. Most of them went to Croatia, which suggests that they were Croatian citizens studying in Slovenia who returned home after graduation.

"Will we allow yet another coup of demagogy? Will they abuse our empathy again?" the weekly wonders.

Reporter: President Pahor is an inclusive statesman

Note: this editorial is actually from last week

STA, 31 December - The right-leaning weekly Reporter commends President Borut Pahor in its latest commentary for his effort to be a voice of reason and a statesman who wants to build bridges rather than ostracise.

As he addressed an open day at the Presidential Palace to mark Independence and Unity Day, the president said he wanted more mutual respect in the coming year, editor-in-chief Silvester Šurla notes in More Respect in 2019!

He adds that Pahor had asked at the national holiday more than 500 visitors to carry on his call for mutual respect, understanding and respect of differences.

The president's words are welcome and they again confirm that Pahor is or at least tries to be the president of all Slovenians more than any of other presidents before him.

"He is making an effort to be a voice of reason, a statesman who does not exclude, but connects."

According to Šurla, in the increasingly politically polarised world, full of ostracising and hatred, such a stance by the president is not always welcomed, unfortunately.

Pahor is being attacked more from the left than from the right, which is very telling. What the leftist ideological extremists have been bothered by most during Pahor's reign is his normal relationship with the political right, concludes the commentary.

All our posts in this series can be found here

STA, 3 January 2019 - The Financial Administration (FURS) launched on Thursday a mobile app giving individuals access to all the services provided by the online system eTaxes.

Apart from providing access to all relevant forms, the app will also provide personalised functionalities such as a calendar and an alert system informing workers if their social contributions had not been paid.

The main objective of the app is to make it easier for individuals to cooperate with the tax authorities. The app will inform users when it is time to file certain forms or pay a certain tax.

Android users can download the app from Google Play and iOS users can get it in the App Store.

The Android app can be found here, while the Apple app is here

Until today, taxpayers could log on to eTaxes with their personal computers using a digital certificate. Existing users will now be able to access eTaxes through the app with their existing accounts.

Electronic tax filing has been available since 2003 and is currently used by 50,000 individuals as well as all companies in the country, as they are obligated by law to have an eTax account.