The Slovenia Times

Incoming finance minister plans tax changes, but not rushed


Ljubljana - Klemen Boštjančič was endorsed as candidate for finance minister on Monday after laying out a blueprint for tax changes that would result in higher proceeds centred around a real estate tax, and tweaks to existing taxes coupled with more effective collection. He said these changes will not be rushed though.

Boštjančič said the prospects for additional tax sources were "fairly limited" but noted that a real estate tax was feasible provided the real estate records are good.

"By that I don't mean a tax on the property you live in, but for the second or third property," he said. Such a tax would also indirectly affect property prices.

As for other taxes, he mentioned tackling individual segments such as the proliferation of tax exemptions for businesses and eligibility for the reduced rate of VAT as potential new sources of revenue.

There are also some reserves in excise policy and the taxation of inheritance. The current flat-rate system for sole proprietors no longer serves its purpose either, according to him.

But Boštjančič was quick to point out that these were just ideas at this point. "I want to emphasise: we will only examine this, none of these things will happen tomorrow, that would be utterly unserious."

The government said in its coalition agreement that the income tax reform implemented under the outgoing government would be reversed, but Boštjančič said this was a process that would take months and would be conducted "in consultation with all stakeholders, including the opposition."

While he deems the latest income tax reform as "mostly sensible," he objects to the fact that it was not coupled with new sources that would offset the shortfall of revenue.

With new sources the subject of deliberation, one of his main tasks will be to make tax collection more effective.

Another major task will be fiscal consolidation and the reduction of the structural deficit. "The way the deficit is now, I'm afraid of it," he said.

The overall state of public finances is not very rosy, which he said was the fault not just of the outgoing government, despite sometimes reckless spending, but also of governments before it.

"I am not in favour of helicopter money ... Many spending measures [taken during Covid] were targeted, fast and effective, but I condemn the throwing of money from a helicopter ... which has translated into a structural deficit."

"The key to general government revenue in the long term is GDP and productivity growth, everything else is an illusion," he said, naming maximising employment and optimising costs across the board as the key components of a solution.

Boštjančič acknowledged that additional spending and borrowing would be needed, but said the additional money had to be channelled into measures that will bring positive effects in the long term and will not have a negative impact on public finances.

With public sector pay accounting for the single biggest source of government expenditure, Boštjančič said he was in favour of a system that rewards effectiveness and good work.

Boštjančič also poured cold water on the notion promoted by the outgoing government that state-owned equity stakes in companies were a way to address age-related spending.

He noted the book value of state-owned companies was ten billion euros, whereas the pension insurer needs a billion in additional budget funding each year.

The key to managing state-owned equity stakes is professionalism, he said.


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