Tax restructure high on Government agenda
In a report from May 2018, the OECD identified that only 14% of total tax revenues in Slovenia comes from income tax (the average in OECD countries being 25%), while it collects 40% from social contributions (the OECD average is 26%). According to their assessment, such a system increases the cost of work and discourages employers from hiring. They propose that the major part of the tax burden should be transferred to income tax instead. So what changes are proposed in this area for 2019?
A comprehensive analysis of the taxation system, which has to be tax-neutral and must be based on the appropriate ratio of taxation of all the relevant factors, will have to be carried out to find solutions to reducing the burden on labour. But the problem is complex, and there is no simple solution that everyone would find acceptable. In principle, it does not matter whether social contributions or income tax are reduced - the shortfall would have to be compensated for from somewhere else in either case. But intervention in social contributions is a difficult political task, as everyone would immediately think it would lead to a cut in already acquired rights to healthcare and pensions. Thus there is very little room for manoeuvre when attempting a rational, argument-based discussion. The Slovenian Democratic Party (SDS), for instance, has filed a proposal for an amendment to the income tax legislation aimed at reducing the burden on labour. This proposal would lead to an income tax shortfall of EUR 350m, which could alternatively be taken from social contributions but would then have to be compensated for elsewhere.
Slovenia ranked 37th on the World Competitiveness Scoreboard published by the International Institute for Management Development (IMD Lausanne), which is a significant improvement on 2017, when it ranked 43rd. The factors behind the improvement include the skilled labour force, high education level and reliable infrastructure in the country, while the weaknesses comprise unskilled governments, an inefficient legal order, uncompetitive tax arrangements, unstable and unpredictable policies, an unfriendly business environment, inefficient working relationships, poor company management and difficult access to financial resources. Where and how will you address these areas or have you already started?
It is good news that we are making progress in this research, but different institutions that conduct such research use different methods and approaches, producing a variety of different results. As far as I know, the institution you mention uses a method that is largely based on the subjective opinions of respondents, and Slovenia is widely known for being highly self-critical. Nevertheless, these findings undoubtedly highlight certain issues that should be taken seriously by taking appropriate measures. As far as taxes are concerned, we have detected certain imbalances, especially in terms of the over-taxation of labour and the relatively low tax on capital. Furthermore, the taxation of property is poorly regulated and so this is an area where we will look for possibilities for optimisation, which has to be properly balanced due to public finance sustainability.
It would be hard for me to agree with the general indication of an environment that is not business-friendly, as in such an environment it would be hard to achieve the high level of economic growth we are witnessing, and foreign investments, which are also on the rise, only further support my opinion. It is true, however, that there are certain areas where it is unfriendly, so to speak, and so it will be necessary to take action (via taxes, levies and administrative procedures). We are well aware that predictability is of key importance for the economy when it comes to business planning processes. Thus we will abide by the interpretation that the key factors of the business environment affected by the Government will not continue changing indefinitely. It is interesting that one of the weaknesses identified is inefficient work relationships, whereby economic operators are frequently occupied with complex and difficult redundancy processes, but there is no mention of a factor which, in my opinion, has become key, namely the labour shortage. In this area, we are working on simplifying, to the greatest extent possible, the process for obtaining licences for foreign workers.
Concerning the indications of unstable and unpredictable politics or incompetent governments, I only have this to say: these are a result of the current voting system and the will of the electorate. All of the former governments were more or less multiparty coalition governments; this is the first minority one. Implementing preferential voting would enable a voter to vote for someone whom they know well, consider to have grown into the challenge and trust to understand the needs and expectations of voters.
When you first visited the University Medical Centre in Ljubljana, you stated that "healthcare is this Government's priority". What are the measures that you are planning to take in order to tackle unacceptably long waiting lists and the poor working conditions and salaries of healthcare workers?
It is true that healthcare is on this Government's priority list, which is why we undertook in the coalition agreement that the Government would gradually increase the share of GDP dedicated to healthcare from 8.5% to 9%. Our goal is to establish quality, financially sustainable and accessible healthcare, distinguished by solidarity. This year, the Government has already dedicated EUR 35m to the reduction of waiting times, and next year this sum is projected to increase to a little over EUR 100m, some of which will also be used to increase the salaries of healthcare workers. Following negotiations with the relevant trade unions, the approximate estimate of the financial impact is around EUR 60m. Let me stress that for other public administration workers such as the police, military personnel and education workers, the money for salaries and salary increases comes from the budget, whereas for healthcare workers the money comes from jointly raised funds in the healthcare fund. Nevertheless, a considerable amount of funds will remain for reducing hospital queues which are, first and foremost, impermissibly long. The health minister is also starting to address other causes. Among other things, he is encouraging the providers of healthcare services to carry out all services for the benefit of their patients. At the Ministry of Health, they are performing an in-depth analysis of backlogs across all regions. Based on this analysis, they will draw up concrete measures, as it will finally be clear why hospital backlogs are associated with certain providers. The Ministry has laid out guidelines based on the General Agreement for 2019, which - as has been the case so far - lay out the priority programmes specifically aimed at shortening waiting times. The Ministry will regularly monitor the data on backlogs and those waiting for treatment and compare them in terms of service provider productivity and efficiency. Based on the findings, we will draw up concrete measures aimed at shortening the waiting times at individual providers. The Minister has also called for hospital management to look into the efficiency of their employees, as the number of nursing staff in fact increased by 30.3% from 2006 to 2018, while the number of hospitalised patients only increased by a mere 2.73%.
Migration is among the key challenges for the EU and common ground on the matter has not yet been reached. How tough is this challenge (including in terms of the approaching crisis) - after all, control at the inner borders of the EU cannot actually be regarded as a safe, long-term solution?
A joint response to mass migration remains one of the key challenges for the European Union. It is commonly believed that the challenge should be tackled primarily by dealing with the causes of mass migration, i.e. through increasing development aid to the countries of origin. Conditions should be created in those countries such that people would not have to leave their homes, in other words. Without properly addressing this issue, it is impossible to speak of a sustainable solution to mass migration. Uniform support in the European Union can also be applied to the strengthening of joint control at the outer borders of the European Union, especially by remodelling the Frontex agency. But the Member States have not yet come to an agreement in terms of the inner aspect of migration, specifically in terms of recasting the asylum legislation. At the moment, the absence of compromise on the matter does not seem to pose a big problem. Having said that, a problem could arise in the event of repeated mass migration, the like of which we witnessed in 2015 and 2016.
It seems that the dispute between Slovenia and Croatia over the state border has reached status quo. What is the next step toward finding a solution with our Croatian neighbours?
After 20 years of failed negotiations, the question concerning the Slovenia-Croatia border has finally been resolved by the Arbitration Tribunal. Slovenia is already implementing the arbitral result to the best possible extent, without Croatian cooperation, and executing the laws passed in relation to the award. Back in December 2017, Slovenia appealed to Croatia with a proposal to establish joint bodies that would implement the arbitral award. Within this framework, a demarcation commission would also be established to draw up and implement the marking of borders. In this process, the hotspots on the territorial border could be slightly adjusted in accordance with the needs of local residents. For the sake of good neighbourly cooperation, Slovenia will remain persistent in encouraging Croatia to engage in dialogue about and the implementation of the arbitral award.