Concern voiced by opposition over proposed tax reform

Ljubljana – The opposition-controlled Commission for Oversight of Public Finances debated on Wednesday the impact of the proposed tax reform on public finances, with one of the adopted conclusions assessing the reform as an inappropriate fiscal response to the current crisis.

The session had been called by the Left, which strongly opposes the package of tax laws that the government claims will improve the competitiveness of the business environment.

Left coordinator and MP Luka Mesec said that the reform would result in a drop in budget revenue of EUR 900 million so that the wealthy may get tax breaks.

According to him, the government behaves as if there is an unlimited amount of money and that it would leave a trail of devastation once it term ends.

Finance Ministry State Secretary Maja Hostnik Kališek retorted that the tax reform pursued the goal of higher competitiveness of the business environment, which would result in sustainable economic growth and more jobs.

This is particularly important for the post-Covid recovery, and additional tax breaks are also expected to provide opportunities for increased investment in Slovenia, she added.

Davorin Kračun, the president of the Fiscal Council, noted that the extensive tax breaks had not been explicitly mentioned, and probably not taken into account, in the budgetary plans until 2024.

Another issue that he sees in the tax reform is the possibility of compensation, as the “general government debt will increase strongly and we don’t know how long monetary policy will be able to support such an expansionary fiscal policy.”

When it comes to macroeconomic policy, the question is whether it makes sense to further facilitate an expansive fiscal policy or “whether one should start gradually thinking about how to again balance out public finances,” Kračun added.

Coalition MPs including Marko Pogačnik of the ruling Democrats (SDS) and Aleksander Reberšek of the New Slovenia (NSi) pointed to the advantages of the reform.

“Someone who works must have enough to support their family and make ends meet normally. The package of tax breaks bring higher net wages for all,” said Reberšek.

Mesec meanwhile said that “such reforms are created by people who do not see beyond their noses. Have you not asked yourselves what will happen in this country in a year or two, are you completely indifferent to that?”

Alenka Bratušek of the opposition SAB said that a coalition should be formed in parliament that did not support reduction of tax revenue in such a way, adding that Finance Minister Andrej Šircelj is secretly aware that the opposition is right.

Robert Polnar of the opposition Pensioners’ Party (DeSUS) said that the reform was political populism and that it it was being preferred to the actual needs of the state.

“You don’t have to be a good expert in fiscal policy or budget documents – household logic is enough. We will get less, and spend more, but everybody will have more. This does not add up,” said Robert Pavšič of the opposition Marjan Šarec List (LMŠ).

Franc Trček of the opposition Social Democrats (SD) proposed that Prime Minister Janez Janša tie a vote of confidence to the tax reform if the government believes it is so good.

After a lengthy debate, the commission adopted five resolutions, one of them assessing that the package of changes to tax laws represented an excessive risk for fiscal sustainability of the entire general government sector.

It also assessed that the package would increase income and property of the wealthiest residents the most, and of the poorest ones the least, contributing to an increased income and property inequality in Slovenia.

Another conclusion was that it represents an inappropriate fiscal response to the current crisis, while the Fiscal Council was called to write up in 30 days a comprehensive analysis of the public finance impact of the tax law package.

The commission also called on the government to coordinate future proposals of tax reform with social partners.

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