OECD Tax Policy Reviews: Slovenia 2018
This report is part of the OECD Tax Policy Reviews. The Reviews are intended to provide independent, comprehensive and comparative assessments of OECD member and non-member countries’ tax systems as well as concrete recommendations for tax policy reform. By identifying tailored tax policy reform options, the objective of the Reviews is to enhance the design of existing tax policies and to support the adoption of new reforms.
This report provides a comprehensive tax policy assessment of the taxes paid by individuals in Slovenia as well as tax reform recommendations. The report is divided into six chapters, with a summary of the main findings upfront, followed by more detailed recommendations at the end of chapters 3 to 6. Chapter 1 sets the scene for tax reform in Slovenia. Chapter 2 focuses on the labour market, social policy and tax policy related challenges. The ensuing chapters assess the financing of the social security system (Chapter 3), identify strategies to strengthen the design of personal income tax (Chapter 4), indirect taxes (Chapter 5), and the taxation of capital income at the individual level (Chapter 6).
Setting the scene for tax reform in Slovenia
Slovenia enters the fifth year of economic recovery. The government has closed the budget deficit and reduced public debt. Slovenia continues to face major challenges: public debt is high, the population is ageing, labour market participation rates are low for old and young workers, long-term unemployment is high, and labour productivity is low. Without reform, the government will have to raise more tax revenues to face the rising costs of ageing, and to maintain the generous transfers system. Population ageing will not only increase public spending but, in the absence of reform, will also put tax revenues under pressure. Reforms should be considered in the context of a tax level which is above the OECD average and a tax mix which relies heavily on distortive taxes on labour. Improving the design of the tax system will also need to reform the financing of local municipalities.