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).
Improving the design of indirect taxes
Slovenia’s tax mix relies heavily on consumption taxes. The standard VAT rate is high and the reduced VAT rate, which is relatively low, applies to a large number of goods and services. As the VAT rate in neighbouring countries is lower, increasing the standard VAT rate might come at significant costs in terms of cross-border shopping. Instead Slovenia should keep its standard VAT rate at its current level. However, there is scope to address regressive distributional effects of the reduced VAT rate. Some of the products and services which are taxed at the reduced VAT rate benefit the rich more than the poor both in relative and absolute amounts. This is the case for cultural activities, hotels, restaurants, and air transport. Over time and when neighbouring countries would continue to increase their rates, there might be some scope to further increase excise duties, in particular on alcohol and tobacco.