Developments in the Member States

Part II

Slovenia S
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Overall trends in taxation o
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Structure and development of tax revenues
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Slovenia's total tax-to-GDP ratio (including social security contributions) amounted to 38 % in 2010, a value that
exceeds the EU average (35.6 %) and the euro area average (36.4 %). Compared to its neighbours, Slovenia's tax
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ratio lies well below Italy's (42.3 %) and Austria's (42.0 %) but slightly above Hungary's (37.7 %). i
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There was a downward trend in the share of indirect taxes since 2000. In 2010, the share of 38.5% of total taxes is
largely in line with the EU average. Social contributions, with a share of 40.1 % of total tax revenue, that ranks
Slovenia fourth in the Union, also play an important role. This share has peaked in 2001 at 38.5 %, declined
regularly until 2007; and increased again in the last three years, reaching its highest value since 1996. It is worth of
notice that employers liable for payment of social security contributions were also subject to a payroll tax (until
2008), introduced in the second half of 1996 to finance a cut of social security contributions from 42 % to 38 % of
wages. As for employees' social contributions, measured as a percentage of GDP (7.9 %), they are the highest in
the EU more than doubling its average. Given the predominance of indirect taxes and social contributions, direct
taxes, experiencing a downward trend since they peaked in 2007, yield in 2010 a low share of 21.8 % of the
total (63) (EU-27 30.4 %).

Taxes collected by central government account for the largest part of total tax revenue (49.1 %). Local
governments collect only 10.8 % of total taxes, i.e. 0.2 percentage points above the EU average (10.6 %) and 2.2
percentage points above the euro area average (8.6 %).

The total tax-to-GDP ratio has fluctuated within a narrow band ever since 2000. Several changes in the tax system
have been enacted since 2005 – the gradual decrease of the CIT rate, the phasing out of payroll taxes, the
introduction of dual system in the PIT taxation, combined with a reduction of the top tax rate, the number of tax
brackets and the increase of the general allowances. As a result in the period 2005–2009, the total tax-to-GDP ratio
dropped by 1 percentage point. However, the small decline was largely due to favourable economic conditions
until 2008 as shown by the cyclically adjusted figures and stable revenues from indirect taxes from 2008 to 2009
resulting from increasing excise duty rates. In 2010, the total tax-to-GDP ratio rose by 0.4 percentage points to
38% in comparison to the previous year.

Taxation of consumption, labour and capital; environmental taxation

At 14.2 % of GDP, revenue from consumption taxes lies above the EU and euro area averages (11.9 % and 11.6 %
of GDP, respectively). The ratio has remained relatively stable since 2000 and consequently the ITR has varied
little overall, oscillating around 24 %.

In line with the overall constancy of taxation levels, the ITR on labour has remained quite stable in the period
2000-2006 at around 37.5 %. However, it dropped by 2.3 percentage points during the last four years in
observation, reaching 35 % in 2010, its lowest value since 1995. This decrease could be explained by the
government's efforts to unburden the qualified workers (by reducing tax rates) and to enhance the incentives to
work for low income earners (by increasing the general allowances). Given a relatively high level of employees'
social security contributions, the ITR on labour still lies, in 2010, 1.6 percentage points above the EU average.

Revenues from taxes on capital were constantly increasing since 2000 and peaked in 2007 at 5.7 % of GDP. Since
then a rather sharp downward trend is observed leading to a value of 4.2 % in 2010. This development was mainly
driven by the proceeds from corporate income taxation, which experienced an almost threefold increase in the
period 2000-2007 and a rapid decrease over the next three years dropping to 1.9 % of GDP. The latter resulted
(63) The difference between the level of the total tax revenue and the sum of the revenues from indirect, direct taxes and social contributions is due to the item 'amounts
assessed but unlikely to be collected' (ESA code D.995). For more detailed information see Methodology.

Taxation trends in the European Union 149