Reflex Legislation

Yesterday Slovenian parliament passed a law imposing additional 49% tax on wages exceeding 12,500 EUR per month and bonuses exceeding 25,000 EUR per year. The law, which effectively imposes a 90% tax on top wages of state-owned companies or companies which have applied for state help was proposed by Zares and is controversial enough to have caught the attention of Reuters. The law was supported by all parliamentary parties, which shouldn’t come as a surprise, given the current economic and financial crisis, in light of which wages and bonuses of some managers, which were huge to begin with, seem enormous in an economy which is projected to drop 8% in 2009 and which suffered a 10% year-on-year drop in the second quarter of this year.

Give me money by Magnifico. A must if you haven’t seen it yet

According to Slovenian Statistics Office, the average gross wage in Slovenia in July 09 was around 1,420 EUR (average net wage in the same period was 922 EUR), which means that earnings higher than ten times the average salary will fall under this “special tax” law. To be even more specific, the law applies to earnings between 1 January 2009 and 31 December 2010 or whenever state help scheme expires (in case of a privately owned company). The law was – among other things – prompted by the fact that former Marjan Kramar CEO of Nova Ljubljanska Banka (NLB) collected about one million euros in accumulated bonuses at a time when the country was already in turmoil over tycoon-loans and when the first contours of crisis were becoming visible. One million knaaks is a lot of money no matter how you look at it but in that particular climate it was just one excess by the fat cats too many.

However. This “special tax” law stinks and is probably the worst piece of populist legislation passed ever since Janez Janša got his ass kicked in the elections.

First of all, if the law indeed is (as it seems to be) a response to Kramar’s bonus excesses, this is yet another example of a introducing systemic changes to deal with specific problems. This was a trademark of Janša’s government, which went on a legislative rampage every time a specific individual needed to be replaced, demoted or otherwise made an example of. Four years of reflex legislation was quite enough, thank you very much. If the left bloc is going to use tricks of the political right, we might just as well close the shop and call it a day.

Secondly, the law will most likely be declared unconstitutional. Since it retroactively taxes wages and bonuses paid since 1 January 2009, it interferes with “an already acquired right or benefit” (not sure about the exact legal term). For this reason and especially in light of decisions in similar cases the Constitutional Court is expected to have a field day with it.

Thirdly. Immediately after the enormity of Kramar’s bonus became know, finance minister Franci Križanič publicly outlined legislation going along exactly the same lines (90% tax on very high wages) but was quickly rebuffed by legal experts for reasons cited above (another case of him working better than speaking).

Fourthly (is that a word?): When Križanič finally got his bearings and was persuaded not to try to introduce the special 90% tax (which, remember is to be comprised from the basic 41% tax for top wages and sweetened by additional 49% tax for excess wages and bonuses) he went about and tried to amend the current taxation system, by raising the top wage tax from 41% to 48%. All hell broke loose, the opposition and part of the coalition pinned him to the wall and he was forced to withdraw the proposal. And now everybody is happily introducing a 90% tax? What the fuck?

Fifthly (how about this?): The law holds mostly symbolic value. Monies returned to state coffers will be barely worth a mention. But since no political party can afford to look like it is protecting the fat cats, everyone voted for the law. But this is no time for symbolism. People are losing their jobs, GDP is southbound and budget deficit is bulging. Some real and bold moves are needed. But by passing symbolic measures the parliament and the coalition (and the opposition in this case) is wasting time we haven’t got.

And last, but certainly not least: I’m willing to bet the law was passed precisely because for reasons for which it shouldn’t have been passed. The opposition and the coalition probably knowing that it will meet its early demise in the Constitutional court, which meant that they could support it without the danger of actually making a difference. And thus everything will remain the same.

Dogs bark but the caravan moves on.

P.S: As you have no doubt noticed, pengovsky is posting a bit more irregularly as of late. Sorry about that, but it seems that one of the effect of the crisis is that we all have to work more for less, while the day refuses to be extended beyond 24 hours.

Published by


Agent provocateur and an occasional scribe.

2 thoughts on “Reflex Legislation”

  1. Re your fourth point, there is one not so tiny difference between the two schemes. The one that just passed only taxes the top earners in state-owned companies and recepients of state aid.

    Although I agree there is an issue with retroactivity and would probably have opted for ex nunc rather than ex tunc application of the new rule, I for one support the idea as such.

Comments are closed.