The Slovenia Times

Views clash over flat tax



The measure is unacceptable as it would aggravate the social situation of low income workers, pensioners and the jobless, he said . On the other hand, Mr Joze P. Damijan, the president of the government reform committee and the chief architect of the reforms, stressed that the government would not let anyone's income deteriorate, a reason for which the committee had proposed "a system of unchanged net wages". Mr Damijan's view was challenged by the opposition MP Mr Matej Lahovnik from Liberalna demokracija Slovenije (LDS), who expressed his doubts that a transition to a flat tax rate (for VAT, and personal and corporate income) would make it possible for net wages to remain the same. Mr Semolic agreed and explained that retail prices would rise if the current 8.5% VAT rate, which applies also to food, increases to 20%. This would mean a weaker purchasing power, in which case "trade unions will demand higher wages", he warned. The CEO of the country's leading retailer Mercator Mr Zoran Jankovic agreed with Semolic - which is a rare occasion indeeed -, saying that it would be impossible to keep prices of foodstuffs at the same level with a flat VAT. Mr Jankovic expects they would rise by some 10%, if the government implemented Mr Damijan's proposals. Mr Damijan disagreed with both Mr Semolic and Mr Jankovic, emphasizing that another measure, a cut in the payroll tax, would reduce labour cost with producers, subsequently making the price hikes with retailers unnecessary. Convinced that a well thought-out reforms should be implemented as early as 2006, Mr Jankovic said that by lowering the payroll tax and introducing a flat tax rate the government would only change the sources of budgetary revenues. "That makes no sense. It we want to improve our competitive ability, we need to cut public spending," he told TV Slovenija. While views differed on most of the issues, all panelists were unanimous in that reform was necessary to boost economic growth and employment, but only if all social partners (trade unions, employers and government) reach a compromise.


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