One aspect that has helped Slovenia remain stable politically is that the ethnic make-up is not extremely diverse.  Almost, 91% of the population is Slovene and they are predominantly Roman Catholic.[27] (See Appendix VIII ) This composition has allowed Slovenia to focus on economic revival rather than religious ethnic conflict, quite unlike their neighbors to the south in Bosnia-Herzogovina.

            In November of 1996, Slovenia had elections and most of the incumbents were re-elected. The LDS won the most seats (25) and the Slovenian People’s Party, conservatives, won the second largest at 19.[28]  This could cause a conflict because, both the liberals and the conservatives have gained a significant amount of power after this election.  In the coming months the coalitions that form with the  parties with fewer seats could be significant for the political climate of Slovenia.  The far right conservatives, United List of Social Democrats(ZLSD- former communists), do not back Slovenia’s entrance into NATO, claiming neutrality should be considered an option; the entrance into the EU will be supported by the ZLSD.[29]  However, economists warn that Slovenia should not rely on its economic successes in the past but instead should focus on increasing privatization and address the slowing industrial production and rising unemployment.[30]  The new government needs to continue to work towards improving the economic state of the Republic if they expect to become more like a Western European country.

Budgetary and Monetary Conditions

            Slovenia  began to stabilize its economy before it had gained its complete independence because inflation was increasing drastically.  Although,  Slovenia made a clean break to independence, there were some costs involved.  Slovenia had 33 percent of its exports going to Yugoslavia, however, with its independence Slovenia had an instant 6 percent decrease in its GDP.[31]  This economic shock was small in comparison to the 38 percent decrease in industrial production Slovenia faced because of its transitional state.  Slovenia stabilized its economy by October 1992.  This was achieved through the introduction of a new currency, the tolar, and the creation of an independent central bank, the Bank of Slovenia.

            The financial sector plays a key role in the transition process.   In 1995, the financial and market services sector comprised 14% of the GDP, the second largest contributor.[32]  In addition, a strong financial sector is necessary for resource allocation and mobilization, and a prerequisite for any large-scale privatization scheme.

            In 1991, there was a  lack of financial regulation in Slovenia, which produced many problems.  Most banks were owned by the firms to whom they lent.  As a result, 30-40 percent of the loans on the books were non-performing.[33]  This combined with a monopolistic structure, lead to exorbitant lending rates, preventing many viable enterprises from access to capital.  In addition, a healthy banking system requires recapitalization and investment to improve service.   This was not happening right away in Slovenia. As a result, banks were audited in 1991 and in the autumn of that year, the Bank Restructuring Agency was founded to deal with these problems and to help restore competition.  Now, most banks in Slovenia have been privatized except two which remain state-owned.

            Monetary Policy

            Facing expansionary monetary policy, Slovenia needed some financial discipline for the newly created enterprises and government, thus, they created the Bank of Slovenia.  The bank was created with the objectives to stabilize prices and establish a balanced functioning of domestic and international payments.  The law that mandated the Bank of Slovenia, allowed the bank  to execute monetary policy, free from political control.  Another characteristic of the Bank of Slovenia that helped its success, was  that the bank would only give out short-term loans to the government to cover cash flow problems. This restriction served to be effective in preventing the accumulation of deficits.  In 1994 the Bank of Slovenia introduced a number of legislative acts which covered the following areas:

                        *  accounting standards and financial statements

                        *  methods of calculation of capital and capital adequacy

                        *  criteria for the classification of balance sheet and off-balance sheet items

                        *  the levels of provisioning for potential losses

                        *  the level of exposure to a single borrower

                        *  capital investments and fixed assets reducing the capital

This legislation was adopted with the intent to ensure safer bank operations that conform to the basic principles of liquidity, solvency and profitability.[34]

            In the early years of transition 1991-1992 the Bank of Slovenia allowed several new banks to start up.  Now, in 1996 Slovenia has the highest concentration of banks in their region, with 31 banks and a relatively small  population of 2 million.  The central bank was faced with the problem of deterring speculators to avoid any kind of banking crisis.  The central bank decided to increase the amount in minimum capital requirements for banks to $35 million.  This move prevented any future mis-happenings while also pushing banks towards consolidation.

            Currency

            In October 1991, the Tolar was introduced.  As a means of inflation-proofing, the law allowed contracts and wage agreements to be denominated in foreign currency so no exchange was required.  The deposits in the banks were converted automatically on a one-to-one basis and 86 billion dinars of personal cash were converted within a short period of time.  The tolar’s introduction came with ease as more than 80 percent of household monetary savings were in foreign currency deposits.[35]  The Tolar’s exchange rate quickly stabilized due to a highly restrictive monetary policy which was aimed at decreasing inflation, increasing stability and strengthening the domestic currency.[36]  Between 1993 and 1995 the Tolar was depreciated to reflect a real exchange rate. (See Appendix IX)  This monetary policy aided in stabilizing the Tolar and making it fully convertible. On November 19, 1996,  1USD was equivalent to 137.69 Tolars.[37]   In addition, the stabilization allowed for foreign investors to conduct business in USD, DM or Tolar.

            Slovenia put tight controls on foreign currency movements in order to maintain the stability of the tolar.  Since the  introduction of the Tolar, total savings deposits have increased by over 494 billion Tolars.  Savings in 1995 accounted for 23.3 percent of GDP.

            Also, Slovenia has a positive balance between the foreign debt and exchange reserves. By August of 1996, foreign allocated debt had reached $4.21 Billion and the exchange reserves were at $4.3 Billion. (See Appendix X) This positive balance shows that the country’s economy continues to stabilize.

            Furthermore, Slovenia has managed to get credit ratings higher than those of Greece and other countries with longer histories of being democracies and having market economies.[38]  As of May 1996, Slovenia had the following Country Credit Ratings : [39] 

                                    Moody’s Investor’s Service                  A3

                                    Standard’s & Poor’s                            A

                                    IBCA                                                   A-

In addition, according to Institutional Investors, Slovenia ranks 47th among 135 countries, with regards to potential areas for investment.[40]

Expenditure Policies and Assignments

            In October 1995, the  Parliament unanimously approved the 1996 draft budget presented by Slovene Prime Minister Janez Drnovsek.  Expenditures are expected to be about 570 billion Tolars (about $5 Bill.).[41]  A significant portion of the expenditures are allocated for health, education and infrastructure.  Revenues for 1996 were expected to be 582 billion Tolars, about

46.5% of Slovenia’s GDP.[42]   The surplus is allocated to cover the Pension and Invalidity Insurance Funds, this action preempts the expected expenditure of 42 billions Tolars in 1997 towards the Pension Fund which is a 20% increase from 1996.[43]    One-third of the budget will be spent on Civil Servants salaries and contributions, much higher that the 1995, due to the desire to increase public employees salaries.  Nearly 11 billion Tolars will be spent on subsidies to exporters for social welfare contributions, technological development, and for maintaining current levels of employment.[44] Although, there were no current figures available concerning defense expenditures figures from 1993 show 13.4 billion Tolars were allocated for the military, about 4.5% of the GDP.[45] Finally about four million Tolars are allocated for liabilities in international agreements to members of the Paris Club and commercial banks; this is a new item in the budget.[46]    However, the current expenditures are being met by disapproval from the Slovenian businessmen, who wanted a budget for 1996 to be equivalent to the 1995 budget.  This demand was not possible for Slovenia, as it tries to battle inflation, unemployment and provide for its’ citizens welfare. 

Tax Structure and Administration

            Intergovernmental Financial Relationships

            Slovenia has had relative success with the administration and collection of taxes from its citizens and corporations at all levels of government..  Article 147 of the Constitution states very generally: " the state shall levy taxes, custom duties and other charges in accordance with statute.  Local government bodies shall levy taxes and other charges in such circumstances as are determined by this Constitution and by statute."[47]  This constant flow of funds has allowed the government to continue to provide needed services, as well as end several years, since independence, with budget surpluses.  The country has tried to diversify the tax base, which has also added to the increased stability of the tax base. 

            Administration

            The Slovene government is making extra efforts to insure successful implementation of  tax policy.  Slovenian tax administrators are taking part in the OECD’s multilateral tax network program which provides advice on taxation practice, policy and systems, with workshops for administrators in member countries such as Austria, Denmark, Hungary and Turkey.  In addition, this program will evaluate the countries after the year is over, regarding  their effectiveness in implementing tax policy.  A key factor that has aided in the current implementation of the tax system is that the Slovenian Tolar is internally convertible, and therefore, foreign investors or business dealing can take place easily in foreign or domestic currency.

             In 1997, Slovenia intends to unify the tax administration offices.  Currently, there are two tax collection services, one for the companies and one for the individuals.[48]  In addition, according to OECD, in the next two years there will be significant changes in the tax policy and administration in Slovenia. 

            Currently, the tax year runs from 1 January to 31 December, with tax returns to be filed by 31 March of the following year (15 April for a consolidated return).[49] In general, the system depends on self-assessment, however, if there is falsification of earnings or evasion of taxes, the government assesses heavy penalties.

            The government, although requiring penalties for late payments is being realistic in the charges it assess for tardiness.  A new act was passed in 1995, which reduced the late payment fees from 25% of amount owed to 18% on all public aged debt including income tax, sales tax and social security late payments.[50] 

            The tax administrators have developed a system which allows for advance payment of taxes and deadlines that apply to readjustment of taxes. Balances due on taxes must be paid five days after the annual return has been filed and if readjustments are made then the company has thirty days to make the payment.[51]

            Corporate Tax and Incentives

            As of 1995, the corporate tax rate was at 25%.[52]  The republic has made a large effort to keep the business environment attractive to foreign investors.  However, the rates were increased to 30% by 1996 and now legislation is trying to reduce the amount to 25% once again; the reduction in taxable income due to re-investment exemptions could make the effective rate 20%, if legislation goes through.[53]  Slovenia continues to honor double taxation treaties signed by the former Yugoslavian government.  In addition, a temporary tax exemption regarding capital gains derived from securities transactions has been extended to January 1, 1997.[54]  "As of January 1, 1994, up to 20% of the amount reinvested in fixed assets(except for cars used for personal purposes) and long-term intangible assets is deductible from the investor’s taxable income, provided that the amount does not exceed the tax base."[55] The tax structure also provides for 30% deductions from taxable income for the first year if  the corporation  hires an unemployed or disabled worker.

Страницы: 1, 2, 3