The proposal is introducing five in place of four personal income tax brackets, dividing the currently third highest into two.

An agreement on the changes was reached by coalition partners before Tuesday's regular session of the government.

According to Finance Ministry State Secretary Mateja Vraničar Erman, the plan is to lower the taxation of all income brackets by a cumulative EUR 55m or EUR 56m and by a total of EUR 5m for those with the lowest income.

Tax on performance and Christmas bonuses should be cut by EUR 45m annually.

The tax rate for the highest bracket will remain at 50% after the coalition rejected Finance Minister Dušan Mramor's proposal for a reduction to 47%.

The tax cut of just over EUR 4m that was planned for this bracket will now be transferred to those in the 34-39% tax brackets.

The 34% and 39% rates are proposed for what is currently a 41% rate for a single bracket affecting those with an annual taxable income of EUR 20,400 to EUR 70,907. The 34% rate would be introduced for a bracket ranging from EUR 20,400 to EUR 48,000.

According to the Finance Ministry this will mean lower taxes for about 10% of taxpayers.

Those making roughly 1.6-times the average gross wage or around EUR 31,000 would keep roughly 39 euros more a year, those making double the average wage would get around 412 euros more a year and those with triple the average wage would keep an extra EUR 1,440.

Some additional tax relief is also being introduced for those with the lowest income, as the threshold for maximum relief is being raised from EUR 10,866 to EUR 11,166. Those making EUR 11,000 would get 335 euros more a year.

The government on tgospodarskohe other hand proposes raising corporate tax by two percentage points to 19% from 17%. Existing incentives for investments and R&D remain in place.

The total tax revenue gains expected from the higher corporate tax rate are EUR 60m.

This means the net effect of all the proposed change would be minus EUR 46m, with the government planning to cover the shortfall with more effective tax collection.

Vraničar Erman said the changes, coming after months of talks, would be expanded next year.

Minister Mramor commented on the deal in Brussels, saying he was happy to see that one of the first steps had been made towards reducing the tax burden on labour.

He also highlighted the relief being introduced for those above the 1.6-times the average wage threshold.

Mramor said these were people of key importance to the country, experts, who are taxed much more in Slovenia than in comparable countries.

This way Slovenia will support the development of high-tech sectors with high added value and thereby also secure higher growth and provide better chances for higher wages, pensions and social transfers, he added.