The Slovenia Times

FinMin Proposes VAT Increase to Salvage Budget


Meeting to debate ways to offset the loss in revenues from the failed real estate tax on Sunday evening, Čufer told the four coalition partners that the VAT increase was the most suitable solution.

The proposal would likely encompass a 2 percentage point increase in the standard rate, currently at 22%, and a 0.5 point increase of the reduced, 9.5% rate, although this is still open.

While saying his proposal had been received positively, Čufer added that "there is no final decision". "I think everyone must think it over, although I believe this is an acceptable proposal."

He argued that this was the most viable solution for making up the lost revenue from the real estate tax, because it can be implemented as early as May and "is backed by economic logic".

If accepted by the coalition, it would result in the second increase in the VAT rates in less than a year, after the top rate was raised by 2 points to 22% and the reduced rate by 1 point to 9.5% in July 2013.

The minister said that the VAT increase would be part of a broader strategy which would eventually lead to a new attempt to implement a real estate tax. If that were to succeed, it could be followed by a reduction in taxes on income.

In addition to the revenue-side measures, Čufer said efforts must also be made to reduce spending. "I raised three things...areas where the least has been done in recent years: health, education and municipalities," he said.

He added that he did not propose a cut in pensions, which is vehemently opposed by the coalition Pensioners' Party (DeSUS).

However, an increase in VAT may also pose a problem for the coalition, as the Citizens' List (DL) has previously said it would not agree to any additional tax increases.

Moreover, Čufer said he was not shying away from responsibility for the annulled real estate tax act. "But you can't have it your way every time," he said.

He also ruled out accepting a resignation from Finance Ministry State Secretary Mateja Vraničar, who headed efforts to draw up the act.

At the meeting, the coalition was also expected to debate candidates to fill the vacant post of Health Minister, after PM Alenka Bratušek met surgeon Danijel Bešič Loredan on Saturday, but no details emerged on the issue.


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