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OECD Tax Policy Reviews: Slovenia 2018

image of 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).

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Tackling the challenges to finance the social security system

Slovenia has a well-developed social welfare system which is successful in reducing inequality. However, it is financed primarily through social security contributions levied at high rates, in particular for employees. This is a challenge given the context of an ageing population. A comprehensive reform of the SSC system is needed and would entail a cut in employee SSCs across all income levels to increase labour market participation. The minimum SSC base is too high and leads to large effective statutory employer SSC rates. The SSC system for employees and self-employed could be further aligned, and the link between SSCs paid and benefits received should be strengthened. Slovenia should consider broadening the SSC base, and aligning the treatment of different types of incomes. To put the funding of the welfare system on a solid footing without reducing entitlements, it will need to partly shifted from SSCs towards general taxation.

English

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