Republic of Slovenia:Selected Issues

This paper provides a background on the key policy challenges for Slovenia in the euro zone. Then, it assesses the discretionary scope to adjust spending and proposes initial steps to enhance budget flexibility so that fiscal adjustment can be targeted on relatively inefficient spending. This study also discusses the long-term fiscal sustainability position of Slovenia using a generational accounting framework. A simulation of retirement incentives suggests that the pension system will encourage individuals to retire earlier than the statutory full pensionable age. These incentives are stronger for low-income earners.

Abstract

This paper provides a background on the key policy challenges for Slovenia in the euro zone. Then, it assesses the discretionary scope to adjust spending and proposes initial steps to enhance budget flexibility so that fiscal adjustment can be targeted on relatively inefficient spending. This study also discusses the long-term fiscal sustainability position of Slovenia using a generational accounting framework. A simulation of retirement incentives suggests that the pension system will encourage individuals to retire earlier than the statutory full pensionable age. These incentives are stronger for low-income earners.

V. Sloveniak: The Tax and Benefit Systems and Incentives to Work34

A. Introduction

93. The labor participation rate in Slovenia is among the lowest in Europe. Over the last decade, Slovenia’s growth averaged 4 percent, and unemployment declined to around 6 percent (Labor Force Survey), surpassing performance in most EU countries. However, the labor participation rate remained lower than the average in the EU–15. The large positive gap between registered and survey unemployment rates partly reflects this problem since registration is a condition for receiving benefits. A large number of registered unemployed are likely not searching for work and therefore would not be counted as unemployed by the survey. Low labor participation has constrained potential output growth, leading to a virtually closed output gap and raising concerns about inflation in the period ahead. Low participation has kept welfare spending high, contributing to one of the highest ratios of nondiscretionary to total expenditures among the EU–8 and considerable fiscal rigidity.35 As Slovenia prepares to introduce the euro, its continuing strong growth in a stable macroeconomic environment will hinge in part on a higher labor participation rate. In addition, this would help to address the looming fiscal sustainability problem associated with Slovenia’s pensions.36

A05ufig48

Labor participation is relatively low…

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

Source: Eurostat.
A05ufig49

…, which is reflected in the gap between registered and survey unemployment rates.

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

Source: Statistical Office of the Republic of Slovenia

94. High taxes and generous benefits are likely to be key factors explaining the lackluster labor participation. Labor taxation in Slovenia is among the highest in Europe. In most cases, the tax wedge dwarfs the averages in the EU–15 and OECD. Taxes include the progressive personal income tax and payroll tax—the latter paid by employers—and social security contributions. The welfare system is generous. In particular, the replacement rate for unemployed individuals with poor income prospects is relatively high. As will be discussed below, the combination of high taxes and generous benefits creates disincentives to seek jobs actively.

A05ufig50

Taxes are high and…

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

Sources: OECD and author’s calculations.
A05ufig51

… Benefits generous.

Net Replacement Rates: Initial Phase of Unemployment at Different Earning Levels, 2004 (OECD), and 2005 (Slovenia) /1

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

Sources: OECD and staff calculations.1/ For married couples the percentage of average wage (AW) relates to one spouse only; the second spouse is assumed to have full–time earnings equal to 67% of AW.

95. This chapter assesses work incentives and reforms that could increase them. The Slovene authorities are planning a tax reform whose aims are broader than increasing labor participation. Their main objective is to decrease tax pressure, particularly for workers at the high end of the income distribution, in order to spur both labor supply and demand. This would be achieved by reducing tax rates and flattening the tax schedule. However, it is not clear that this reform would increase labor supply among low–wage earners as well. Such outcome would depend on how the reform affects the eligibility and amount of benefits, thereby highlighting the importance of reforming the tax and benefit systems simultaneously to create proper work incentives and boost labor participation. This paper, in turn, reviews labor participation and the tax and benefit systems in Slovenia; analyzes incentives to work under the current system based on marginal effective tax rates (METRs); and, finally, examines possible alternative reforms.

B. Labor Participation and Tax and Benefit Systems in Slovenia

96. Low labor participation rates are prevalent among specific groups of individuals, particularly those with poor income prospects. Relative to the EU–15, participation is weak for younger and older individuals, which suggests that these categories either encounter difficulties in finding jobs or do not have appropriate incentives to look for them. As participation is also weak among individuals with low education attainment (a proxy for income prospects in the labor market), the lack of sufficient incentives appears to be a strong candidate for explaining this outcome—although labor demand considerations could also play a role. This situation implies that low–income individuals have high reservation wages due to generous benefits. In this paper, we will focus on labor participation among low–income individuals, a large share of which may be represented of young workers. 37

A05ufig52

Activity Rate by Age Groups

(Labor Force Survey)

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

Source: Eurostat
A05ufig53

Activity Rates (15–64) by Level of Education Attained

(Labor Force Survey)

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

Source: Eurostat

97. Performance in employment and unemployment has also been uneven among low–income groups. In particular, employment and unemployment rates have been lower and higher, respectively, than among the rest of the Slovene population. Employment rates have also been lower than those of peers in the EU–15. Thus, not only do low–income individuals participate less, but also a larger share of those who are active are unemployed. This outcome could be due to a lack of qualifications, high labor costs, and other factors, such as lack of job mobility and fungibility that would limit labor demand. It could also result from generous benefits that dampen efforts to seek work aggressively. All of these factors are likely to have some relevance, but we will investigate specifically the role the tax and benefit policies play in discouraging labor supply among low–income individuals.

A05ufig54

Employment Rates (15–64) by highest level of education attained

(Labor Force Survey)

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

Source: Eurostat
A05ufig55

Unemployment Rate (15–64) by highest level of education attained

(Labor Force Survey)

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

Source: Eurostat

98. The income tax in Slovenia is among the most progressive in Central Europe and tax rates are high. The Slovene personal income tax system is very progressive, with the top rate, at 50 percent, among the highest in Central Europe. As indicated above, the tax wedge in Slovenia is also quite wide, in some cases exceeding the EU–15 average (see para. 2). High tax rates have been associated with poor labor market performance, but taxes alone would not determine an individual’s decision to seek additional income through a job. The availability of social benefits should also be factored in.

Top Rates of Personal Income Tax in Selected Countries

(In percent)

article image

Flat tax and threshold under which income is tax–exempt.

99. Social benefits, particularly those pertaining to labor income replacement, are also among the most generous. The Slovene welfare system provides a wide array of benefits which are more generous than EU standards.38 Support to jobless individuals takes several forms. Unemployed workers who have contributed initially receive the unemployment insurance benefit (UB) and subsequently receive unemployment assistance (UA) when the UB runs out. Individuals who do not qualify for these benefits are entitled to a top up in earnings to the guaranteed minimum income (GMI). In terms of work incentives, the main problem for low–income workers is that the difference between the minimum UB and the other two benefits is not large. In addition, while the UB is taxable and subject to social security contribution, the UA is free of both deductions (see Box 1). Thus, individuals who qualify for UA after receiving the minimum UB derive a financial windfall. This will become more apparent in the next section in the calculation of marginal effective tax rates (METRs).

A05ufig56

Slovenia: Selected Social Benefits

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

Source: Slovenia’s Ministry of Labor and Social Affairs

Slovenia: Taxation and Benefits Related to Job Status

Labor income taxation. Labor income in Slovenia is subject to personal income and payroll taxes, as described in the tables below. In addition to the general tax allowance that each individual is entitled to, families with children can deduct a child allowance amounting to roughly 14 percent of the average wage for the first child; this allowance declines at a decreasing rate for subsequent children. The payroll tax is paid entirely by the employer. In 2005, the government decided to gradually phase it out (totally by 2009), beginning with a 20 percent reduction in the rates effective January 1, 2006. Social security contributions apply to gross wages at the rate of 22.1 percent for employees and 16.1 percent for employers.

Personal Income Taxes (in percent of average wage) and Tax Rates

(In percent)

article image

Payroll Tax

article image

Reduced by 20 percent from January 2006

Benefits related to job status. The three main benefits related to income replacement when jobless, as certified by registration in the Employment Service, are outlined in the table below. In addition, individual or families with children are eligible to receive child benefits, which vary as illustrated below. The child benefit is inversely related to income levels, as one would expect, but also increase more than proportionally with the number of children. This last feature has not paid off since Slovenia’s fertility rate is the lowest in Europe. The benefits outlined in this chapter do not cover the whole set available in Slovenia. For instance maternity leave and childcare assistance also play an important role. However, the benefits the chapter focuses on are the ones that affect work decisions directly and are easily tractable for calculating METRs.

article image
Source: Ministry of Labor and Social Affairs.
A05ufig57

Slovenia: Child benefit

(percent of average wage)

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

Source: Ministry of Labor and Social Affairs

C. Marginal Effective Tax Rates and Incentives to Work

100. From a theoretical viewpoint, high marginal effective tax rates (METRs) provide a measure of work incentives. The METR is the change in the combination of taxes paid and benefits received at different levels of income. At the margin, one compares the effective tax rate from one income level (1) to the next (2), therefore obtaining the METR as follows (Carone and others, 2004):

METR=1ΔynetΔygross=1(y2(1tyrssc)+b2(1tb))(y1(1tyrssc)+b1(1tb))y2y1

where y1 is one gross income level and y2 is the next gross income level; ty is the rate of income tax; rssc is the rate of social security contribution; and b1 and b2 are total benefits at income levels 1 and 2. As the METR measures the percentage of an additional dollar earned that is lost through the interplay of taxes and benefit, it is a key factor in determining the decision to seek work and that dollar. Using this formula, we calculate METRs in Slovenia to evaluate work incentives under the current system.

101. The current tax and benefit systems produce high METRs, particularly at the lower end of the income distribution. As discussed above, low–income individuals who have exhausted their UB receive a windfall when they become eligible for UA because the amount lost in terms of reduced benefits is more than offset by the gain associated with the exemption from income taxes and social security contributions. As a result, METRs between the minimum UB and UA exceed 100 percent (and top 200 percent in some cases, as illustrated in the figure below).39 In addition, while the duration of the UB for most people is limited to 6 months, the duration of UA is 15 months across the board. 40 In fact, over the years, while the number of UB recipients has declined, the number of UA recipients has increased, stabilizing recently.

A05ufig58

METRs under the Current Tax and Benefit Systems

(In percent)

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

Source: IMF staff calculations.
A05ufig59

Slovenia: Recipients of Unemployment Benefit and Assistance

(in percent of total recipients)

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

Source: Slovenia Ministry of Labor and Social Affairs

102. Moreover, the current system makes it rather costly to exit from joblessness. As discussed earlier, joblessness, whether from inactivity or unemployment, affects mostly low–income individuals. Therefore, an important social objective is to find jobs for this segment of the population. However, the combination of progressive tax rates and generous benefits would produce for most people high and increasing METRs when exiting joblessness, depending on the type of benefit they are currently receiving, the salary paid by the job they take up, and their family status. As illustrated in the charts below, most people would face METRs in the range of 30–55 percent, which are quite high and may discourage not only low–income workers but also spouses in families where there is a principal breadwinner. This could explain why female participation is lower than that of males.

A05ufig60

METRs for a Single Individual Without Children Taking Up a Job Under the Current System

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

Source: IMF staff calculations.
A05ufig61

METR for Married Couple with Two Children where Principal Earner Earns 0.67 AW and Secondary Earner Takes Up a Job under the Current System

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

Source: IMF staff calculations.

103. The introduction of a flat tax alone would not improve work incentives for lowincome workers. A flat tax of 20 percent has been one of the tax reform proposal considered. Such a reform would significantly improve work incentives for high–income workers by reducing dramatically their METRs to around 35 percent (see figure below) from current levels of over 60 percent (for income levels above roughly four times the average wage). However, as participation for these workers is already above EU–15 averages, it is therefore unlikely that this would significantly boost their activity rate (although in terms of hours worked, it might make a difference). In contrast, a flat tax, if not accompanied by other changes, could worsen incentives for low–income individuals because their tax rate would likely increase. METRs for those taking a job would continue to be high, reaching 50 percent for a single individual moving from UA to a job paying the minimum wage. This is precisely the type of individual whose participation is currently low. In addition, the flat tax would raise average effective tax rates for low–income individuals while reducing those of high income ones (see Figure 3). Aside from the authorities’ objective to make changes in the tax system revenue–neutral, a fair and incentive–rich reform should aim to deliver simultaneously lower average and METRs for most people. We take up this question next.

A05ufig62

MMETRs under a Flat Tax and Unchanged Benefits

(In percent)

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

Source: IMF staff calculations.
A05ufig63

METRs for a Single Individual Without Children Taking Up a Job Under a Flat Tax and Unchanged Benefits

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

Source: IMF staff calculations.

D. Reforms to Increase Labor Participation

104. Based on the literature and practical experience, work incentives could be improved through reforms that affect both the tax and benefit systems. The earned income tax credit (EITC) is one such reform. It provides a payment to low–income individuals who take low–wage jobs. This scheme reduces their METRs, thus providing a stronger work incentive. In the United States, the introduction of the EITC was instrumental in reducing welfare rolls during the 1990s (Hotz and Scholz, 2000). However, the same authors argued that the scheme succeeded due to the relatively low minimum wage, social benefits and tax rates in the United States. Although these preconditions are not necessarily present in Slovenia, the EITC should not be ruled out completely, especially as past reforms in Slovenia have achieved a measure of success.

105. In Slovenia, past benefit reforms to improve work incentives have increased job search efforts. Using legislative changes in 1998 pertaining to the duration of the unemployment benefit, Van Ours and Vodopivec (2006) found that exits from registered unemployment rose among those individuals whose UB duration had been curtailed. The tightening of duration exempted those recipients who had been unemployed for less than 18 months, thus providing a natural experiment to assess whether job search efforts had changed following the reform. The duration of unemployment for those whose UB eligibility duration had been cut dropped significantly and quickly. In contrast, the duration of unemployment among younger unemployed workers did not decline. Since they accounted for the bulk of those with unemployment spells shorter than 18 months, this provided evidence that the shortening of the unemployment duration among the rest was due to increased job search efforts rather than better labor demand conditions. Although working through shorter duration as opposed to smaller benefits (a trade–off that is beyond the scope of this paper), the results show that expectations could be successfully changed, thus sparking more intensive job search and achieving higher participation rates.

Median Duration of Unemployment in Months, Simulation Results 1/

article image
Source: Van Ours and Vodopivec (2006).

Median worker is a 30–year–old male, with vocational education, 10–15 years of work experience, and no dependent family members. With the change in the law, this person’s unemployment benefit duration was lowered from 12 to 6 months.

106. One possible option to reduce marginal tax rates for low–income individuals would be to change the benefits associated with joblessness. The main source of the high METRs among low–income workers is the lack of sufficiently large differences between the minimum UB, the UA, and the GMI. This option would be based on the following elements:

  • With regard to benefits, the GMI (currently amounting to 71 percent of the minimum UB) would be left unchanged, as it is linked to the poverty line. The UA would be reduced to half the minimum UB from the current ratio of 80 percent. Since the UA would be smaller than the GMI, it would be regarded as a temporary support that the unemployed could not count on to live a decent life, leading to more intensive job search. An individual who had exhausted his UB would qualify to receive UA and would not be able to opt for the higher GMI during the statutory duration of the UA, which also could be shortened. We assume an unchanged child benefit.

  • As an alternative to the flat tax, the Slovene authorities have been considering a tax schedule with two or three tax brackets. The paper considers a possible three–rate system, as described in the table and chart below. A tax rate of 15 percent would target individuals with taxable income up to the minimum wage, representing a slight reduction from the 16 percent most of them face at the moment and cover slightly more people (the current upper income bracket represents 38½ percent of the average wage). The bulk of the working population would face a rate of 20 percent (the figure that is cited most frequently as a possible flat tax rate). Finally, individuals whose taxable income is at least twice the average wage would be taxed at a rate of 25 percent. The general tax exemption, as well as the child tax exemption, would remain unchanged. However, it is assumed that all labor incomes whether subject to the personal income tax or not, would be subject to social security contributions at the current rate of 22.1 percent.

article image
A05ufig64

Slovenia Personal Income Tax Rates

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

107. The hypothetical alternative reform of the tax and benefit systems outlined above would strengthen job search incentives for low–income individuals. From the benefit point of view, the reduction of UA and the signal that it is no longer sufficient to depend for an extended period on social support would intensify the search for work. On the one hand, this reform would lead to a decline in the number of UA recipients, which has increased in the face of a decline in overall unemployment. On the other hand, the reduction of the METR (rather than increase under the flat tax) would raise take–home income. As illustrated in the figure, together these reforms could reduce METRs for most people relative to the current system and for most lowincome individuals relative to the flat tax proposal. In particular, they would eliminate the spike between the UA and the UB. METRs could be made smoother by adjusting the other benefits (such as the child benefit) and/or various tax exemptions, particularly at the points where tax rates increase.

A05ufig65

METRs under a Three-Rate Tax System and Unchanged Benefits

(In percent)

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

Source: IMF staff calculations.

108. With the caveat that this is a partial equilibrium analysis, one can draw some lessons by comparing the three systems—the current system, the flat tax system, and the proposed three–rate system—focusing not only on incentives to work but also on fairness of taxation:

  • Figure 1 shows marginal effective tax rates for a single individual without children and for a married couple with two children at various income levels of both spouses under the current system, the flat tax system (a 20–percent flat tax with unchanged benefits) and the three rate system (15–20–25 percent). The latter delivers lower METRs than the former two in the income range up to the average wage. Beyond that point, the flat tax produces lower METRs as one would expect, since no other changes are made to tax allowances and benefits.

  • The alternative three–rate tax system would increase incentives to seek work for lowincome individuals. Figure 2 depicts METRs when taking a job under the three systems. The cases of a single individual without children and of a married couple where the principal earner earns 67 percent of the average wage are shown here because they are good representatives of individuals with the lowest income levels. Whether taking a job from complete inactivity, from the UA, or from the minimum UB, these individuals or families in most cases, face METRs that are lower under the three–rate system than currently or under the flat tax. This remains the case whether the job found pays the minimum wage, the full average wage, or an income that is up to twice the average wage. Nevertheless, METRs would continue to be somewhat high (up to 40 percent in some cases). Therefore, a careful calibration of other benefits and tax allowance could create a system with lower METRs.

  • Figure 3 contains charts of the average effective tax rates (i.e., what percentage of the overall income from labor and the welfare system is paid to the government) faced by various families. As the flat tax system would raise the tax rate of low–income workers, it would—under unchanged benefits and up to a point—generate higher average effective tax rates than both the current and three–rate tax systems. The three–rate system produces consistently lower average effective tax rates than the other systems, with two notable exceptions. First, individuals receiving the UA would face higher effective tax rates. This is consistent with the change designed to give them incentives to seek work. Second, the average effective tax rates would outstrip those of the flat tax at some point owing to the higher tax rate of 25 percent. However, the intersection in most cases happens well beyond income levels equal to twice the average wage, where the tax rate increases. Therefore, higher (around 35 percent) effective tax rates would apply only to individuals who are well off.

Figure 1.
Figure 1.

Slovenia: Marginal Effective Tax Rates for Selected Individuals 1/

(In Percent)

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

1/ For simplicity of calculations, it is assumed that (i) single individuals who are not eligible for UA receive the full GMI; and (ii) spouses in families where there is a principal earner do not receive the GMI. In couples, the x–axis shows the income of the secondary earner.
Figure 2.
Figure 2.

Slovenia: Marginal Effective Tax Rates Faced when Taking Up a Job from Joblessness 1/

(In Percent)

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

1/ For simplicity of calculations, it is assumed that (i) single individuals who are not eligible for UA receive the full GMI; and (ii) spouses in families where there is a principal earner do not receive the GMI. In couples, the x–axis shows the income of the secondary earner.
Figure 3.
Figure 3.

Slovenia: Average Effective Tax Rates for Selected Individuals 1/

(In Percent)

Citation: IMF Staff Country Reports 2006, 250; 10.5089/9781451835786.002.A005

1/ For simplicity of calculations, it is assumed that (i) single individuals who are not eligible for UA receive the full GMI; and (ii) spouses in families where there is a principal earner do not receive the GMI. In couples, the x–axis shows the income of the secondary earner.

E. Conclusion and Policy Recommendations

109. The Slovene tax and benefit systems create disincentives to work, and these disincentives explain in part why labor participation in Slovenia is weaker than the EU–15 average among several groups of workers and particularly those with poor–income prospects. Under the current tax and benefit systems, marginal effective tax rates are high, discouraging labor participation at the lower end of the income distribution. In particular, those taking a job from being jobless face METRs that would discourage intensive job search.

110. This situation suggests that reforms to improve work incentives should focus on both the tax and benefit systems. Evaluation of marginal effective tax rates generated by a hypothetical 20 percent flat tax with unchanged benefits shows that work incentives for individuals with poor–income prospects would worsen. This would defeat the important objective of raising labor participation rates, which is crucial for lifting potential growth. However, an alternative that is also being considered by the Slovene authorities could solve these problems; adopting three fairly low rates of personal income tax and widening the gap between the minimum UB and the UA would lower marginal effective tax rates for most individuals. Work incentives would increase, and average effective tax rates for most people would decline.

111. Further work taking account of aspects of the welfare system not directly related to job status, as well as other effects of tax and benefit reforms, would be a natural extension of this analysis. Keeping in mind that results in this paper reflect a partial equilibrium perspective, the analysis could be widened to look into the whole spectrum of benefits available in Slovenia and labor demand considerations. Assessing the budgetary impact of the reform would also be crucial before implementation.

References
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  • Carone, Giuseppe, and others, 2004, “Indicators of Unemployment and Low–Wage Traps (Marginal Effective Tax Rates on Employment Incomes)” OECD Social, Employment and Migration Working Paper No. 18 (Paris: OECD).

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  • Hotz, V. Joseph, and John Karl Scholz, 2000, “Not Perfect, But Still Pretty Good: The EITC and Other Policies to Support the US Low–Wage Labor Market,” OECD Economic Studies, No.31, (April, 2000/II), pp. 25 –41.

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34

Prepared by Philippe Egoume–Bossogo. The author thanks Mr. Gonzalo Caprirolo of the Ministry of Finance of Slovenia for providing the data and for useful discussions.

35

See Chapter II, “Budget Rigidity and Expenditure Efficiency in Slovenia.”

36

See Chapter III “Impact of Aging on Fiscal Sustainability in Slovenia.”

37

Low labor participation among individuals aged 15–24 may also be due to the “student status”. As it exempts employers from payroll taxes and social security contributions, it may have led to abuses and under–reporting. However, data to measure the phenomenon are not available. For a discussion about low labor participation among older individuals and incentives to retire earlier, see Chapter IV, “Retirement Incentives in the Pension System in Slovenia.”

38

See IMF Country Report No. 05/253, Table 8, which provides a comparison of selected benefits (amount and duration) in Slovenia and several EU–25 countries.

39

Most low–income earners who become unemployed would be eligible for the minimum UB or an amount close, and thus would receive a financial windfall when they exhaust the UB and qualify for UA. In this case, the METR between the minimum UB should be regarded as a marginal effective subsidy that accrue to recipients of UA.

40

The duration of the UB could reach 24 months for workers over 55 with insurance periods over 25 years. The UA duration could rise to 3 years if conditions for old–age pension were fulfilled during this period.

Republic of Slovenia: Selected Issues
Author: International Monetary Fund
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    Labor participation is relatively low…

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    …, which is reflected in the gap between registered and survey unemployment rates.

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    Taxes are high and…

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    … Benefits generous.

    Net Replacement Rates: Initial Phase of Unemployment at Different Earning Levels, 2004 (OECD), and 2005 (Slovenia) /1

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    Activity Rate by Age Groups

    (Labor Force Survey)

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    Activity Rates (15–64) by Level of Education Attained

    (Labor Force Survey)

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    Employment Rates (15–64) by highest level of education attained

    (Labor Force Survey)

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    Unemployment Rate (15–64) by highest level of education attained

    (Labor Force Survey)

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    Slovenia: Selected Social Benefits

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    Slovenia: Child benefit

    (percent of average wage)

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    METRs under the Current Tax and Benefit Systems

    (In percent)

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    Slovenia: Recipients of Unemployment Benefit and Assistance

    (in percent of total recipients)

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    METRs for a Single Individual Without Children Taking Up a Job Under the Current System

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    METR for Married Couple with Two Children where Principal Earner Earns 0.67 AW and Secondary Earner Takes Up a Job under the Current System

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    MMETRs under a Flat Tax and Unchanged Benefits

    (In percent)

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    METRs for a Single Individual Without Children Taking Up a Job Under a Flat Tax and Unchanged Benefits

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    Slovenia Personal Income Tax Rates

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    METRs under a Three-Rate Tax System and Unchanged Benefits

    (In percent)

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    Slovenia: Marginal Effective Tax Rates for Selected Individuals 1/

    (In Percent)

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    Slovenia: Marginal Effective Tax Rates Faced when Taking Up a Job from Joblessness 1/

    (In Percent)

  • View in gallery

    Slovenia: Average Effective Tax Rates for Selected Individuals 1/

    (In Percent)