STA, 1 August 2022 - The latest income tax reform, introduced by the previous government in the spring, significantly affects public revenue, the Finance Ministry said on Monday, announcing changes that are to enter into force next year. The government plans to annul the increase of the general tax relief and the cut in the tax rate for top earners.
The amendments to the income tax act which were passed in March and took effect retroactively from the beginning of the year raised the general tax relief from EUR 3,500 to EUR 4,500 and should raise it to EUR 7,500 by 2025. They also reduced the tax rate for the top earners from 50% to 45%.
But ministry plans to cancel all this. In line with its proposal, the general tax relief will go up only to EUR 5,000 on 1 January 2023 with no other rises to follow.
"We're not abolishing all reliefs envisaged by the law passed at the beginning of the year," Finance Minister Klemen Boštjančič told the press today.
The ministry proposes raising the general tax relief by just EUR 500 rather than EUR 1,000, because of inflation and the rising costs of living, he explained.
It also proposes raising the amount for income for which additional general tax relief is still acknowledged from EUR 13,716 to EUR 15,000. "Thus net income of those with the lowest income will be higher than it would be if the income tax was left as it is," the minister said.
A special tax relief is proposed for the young up to the age of 26.
The tax rate for the top earners should go back to 50%, from the current 45%, while income from rents will again be taxed as it was before 2020.
The tax on capital that was this year cut from 27.5% to 25% should not be changed.
The changes will, however, affect corporate taxes and should bring EUR 90 million more in tax revenue to the national budget.
Because of the changes to the general tax relief, EUR 180 million more will pour into the budget in 2024 and EUR 170 million in 2025, the ministry said.
Meanwhile, employees on the minimum wage will receive EUR 316 more a year than this year. Under the current law, they would receive EUR 157 more. Those with higher wages will get less than they would under the current law but still more than they will receive this year. Those receiving average wages will receive EUR 130 more a year and those earning double the average wage will get EUR 165 more a year, the minister said.