Tax policy analysis

Reshaping the Personal Income Tax in Slovenia




Publish date: 13 June 2018



Main findings

In this report, the OECD presents a tax reform package that prepares Slovenia for the ageing of its population. Slovenia faces a window of opportunity for a comprehensive tax reform that rebalances the tax mix away from employee social security contributions (SSCs) towards the personal income tax (PIT). The reform should incentivise older workers to stay in the labour market longer and younger workers to enter the labour market sooner and should reduce unemployment, in particular of the low-skilled. The reform has to be (at least) revenue neutral, and be implemented hand in hand with a broader set of reforms, including a pension and health care reform.

By reducing the employee SSC rate and broadening the PIT base, Slovenia has an opportunity to rebalance the tax mix away from employee SSCs towards the PIT. In order to put the funding of the welfare system on a solid footing without reducing entitlements to social benefits, the reform will need to shift the funding of the pension and health system partly from SSCs towards general taxation. Opportunities also exist to rebalance the tax mix towards taxes on capital income at the individual level. In addition, there is some scope to finance a cut in SSCs by broadening the VAT base and by strengthening the role of the recurrent tax on immovable property in the financing mix of municipalities away from revenues from the PIT.