Slovenia to impose property taxes to help ease its budget deficit

PUBLISHED : Wednesday, 23 October, 2013, 4:49am
UPDATED : Wednesday, 23 October, 2013, 4:49am

Slovenia plans a new tax on real estate from next year to boost budget income, as the small euro- zone member strives to avoid seeking an international bailout.

The annual tax will be from 0.07 per cent to 0.75 per cent of the value of property, depending on the type of land or building.

Finance Minister Uros Cufer said the new tax would bring in about €390 million (HK$4 billion) a year, with half of that going to local communities and half to the state budget.

The income from the new tax is already included in the 2014 budget plan, which sees total budget revenue at €8.6 billion and is expected to be passed by parliament next month.

Slovenia plans to cut its budget deficit to 3.2 per cent of GDP next year from 4 per cent this year.

Whether it meets those targets and is able to fix its debt-laden financial sector on its own remains dependent on bank stress test results that are due later this year.

Slovenian banks, mostly state-owned, are choking with €7.9 billion of bad loans, equal to more than a fifth of GDP. The loans are at the heart of speculation that the country could ask for a bailout within months.

The government claims it will be able to avoid the bailout on the back of reforms that include higher taxes, lower budget spending and privatisation and a banking overhaul that will start once the external stress tests are completed.

Slovenia was the fastest-growing euro-zone member in 2007 but was badly hit by the global crisis due to its dependency on exports. It fell into a new recession last year amid lower export demand, a credit crunch and a fall of domestic spending caused by budget cuts.