Slovenia - Politics, government, and taxation

Slovenia emerged from the former communist Yugoslavia in 1991 as a parliamentary republic with a multi-party democratic system, remarkably moderate and consensus-oriented. The center-left Liberal Democracy of Slovenia (LDS) won the parliamentary election in October 2000, securing 34 seats in the 90-member National Assembly, which gave it a wide edge over the largest center-right group, the Social Democratic Party (SDS), which took 14 seats. The left-of-center United List of Social Democrats (ZLSD) won 11 seats, while the Democratic Party of Slovene Pensioners (Desus) and the Slovene National Party (SNS), 2 other left-of-center formations, made their way back into the Assembly. The election ended in defeat for the 3 main center-right parties of the Slovene Spring movement—the SDS, the Slovene People's Party, and the New Slovenia-Christian People's Party, which together got only 31 seats, one-third down from the 45 deputies that they had after the 1996 election—a result that destroyed their ambitions of reviving the coalition government that they formed in June 2000. All major parties (with the possible exception of SNS) firmly support EU membership and (with the possible exception of ZLSD) entrance into the North Atlantic Treaty Organization (NATO), both of which are expected in the 1st decade of the 21st century.

The LDS positioned itself as a party equipped to guide Slovenia through the challenges likely to be encountered on the path to EU membership and globalization. It demonstrated its commitment to modernization, along with its liberal economic agenda, including plans to privatize banking, insurance, and the energy sector. The electorate swung to the LDS primarily because of its record for competence. This party in fact ran the country from early 1992 until April 2000, playing the leading role in 3 coalition governments, all of which were headed by the party leader, Janez Drnovsek. Convincing evidence has not backed up innuendoes from the right that the LDS has grown corrupt. The LDS government is expected to fulfill its pledges for privatization of state assets, deregulation , reducing the time needed to set up a company, technology development, and boosting the GDP growth rate to 5 percent. Also expected is expansion of post-graduate study programs, computerization of schools, increased social assistance to the poor by 60 percent, cutting of unemployment by 20 percent, and an active social housing policy.

The state still has considerable influence in the economy, with the public sector accounting for roughly 50 percent of the output and public consumption over 20 percent of the total. The continued dominance of the financial sector by state-owned banks is said to hold back development and competition. The slow progress on privatization and somewhat rigid business conditions are keeping foreign direct investment at a low level. Progress in improving the economic climate, combined with a full and timely completion of privatization, structural reforms, and market liberalization , would attract more foreign investors and provide better conditions for sustained future growth. Privatization deals in Slovenia, however, have been largely a success, unlike the ones in Bulgaria, where many enterprises went to management-employee ventures in deals largely seen as politically motivated, ineffective, and even corrupt.

Public accounts show that the overall tax burden in 1998 stood at 40.5 percent of GDP. Income taxes are progressive, and a value-added tax was recently introduced at a standard rate of 19 percent and a lower rate of 8 percent. Parliament passed a law in 1998 taxing motor vehicles, which had frequently been discussed but never adopted. The new tax rate depends on the price, varying from 1 to 13 percent. A new law governing taxation of the insurance business was also recently passed, providing for premiums to be taxed at a rate of 6.5 percent. No tax will be paid on certain insurance products, including mandatory pension and health insurance.

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