Slovenia has entered a period of political uncertainty following the inconclusive March 22 elections, but the absence of a new government has not prevented a fierce debate over a far-reaching draft development law that could reshape the country’s tax and social systems.

The proposal for the Act on Intervention Measures for the Development of Slovenia, tabled by the right-wing bloc comprising New Slovenia (NSi), Slovenian People's Party (SLS), Fokus, the Democrats and Resni.ca, has quickly become a focal point of Slovenia’s post-election landscape.

While its proponents frame it as a necessary intervention to boost competitiveness and ease living costs, critics warn it could undermine the foundations of the country’s social model.

The political backdrop is fragile. The liberal Freedom Movement, led by Robert Golob, emerged as the largest party but secured only a narrow one-seat lead over the right-wing Slovenian Democratic Party (SDS). The act could potentially gain backing from the right-wing SDS, led by former prime minister Janez Janša.

Golob has since abandoned efforts to form a coalition after failing to secure the 46 votes needed for a parliamentary majority, leaving the country in a legislative limbo, while potentially paving the way for a right-wing government.

Into this vacuum, the draft law has stepped as both an economic programme and a political signal.

Tax burden

At its core, the proposal aims to reduce the tax burden on individuals and businesses, streamline administrative procedures and improve access to public healthcare.

Among its headline measures is a reduction of VAT to 5% on 15 basic food items, including gluten-free products, alongside a temporary nine-month cut to 9.5% for electricity, natural gas, district heating and firewood—steps designed to cushion households from rising living costs, according to broadcaster RTV SLO.

The bill also targets Slovenia’s entrepreneurial environment. It proposes raising the revenue threshold for standardised entrepreneurs to €150,000 annually, with a flat 20% tax rate and progressively recognised expenses.

For the self-employed and farmers earning up to roughly €18,000 per year, a new scheme would slash monthly social contributions from about €650 to €250, potentially lowering barriers to entry for small-scale economic activity.

Further provisions include scrapping additional long-term care contributions for certain categories of workers, including those engaged in supplementary activities and pensioners, and allowing retirees to receive a full pension while continuing to work under a new contract. The draft also suggests temporarily suspending parts of the new Hospitality Act until the end of the year.

Supporters argue that these measures respond to both structural and immediate economic pressures. The Chamber of Commerce and Industry of Slovenia has strongly backed the proposal, rejecting criticism that it disproportionately benefits the wealthy.

“This bill cannot be understood as a bill for the rich,” said the chamber's director general Vesna Nahtigal, stressing that the measures aim to create a more predictable and transparent business environment aligned with other EU member states. 

Forceful opposition 

The most forceful opposition has come from labour representatives. The Association of Free Trade Unions of Slovenia has criticised both the substance of the bill and the timing of its introduction, noting that it was submitted before a new government could be formed.

“We were indeed negatively surprised with the bill and the way it was introduced to parliament before the new government has even formed. We see this as an attempt to bypass social dialogue at the Economic and social council and effective coordination with social partners on a bill that would have large systemic consequences,” the Association of Free Trade Unions told IntelliNews in a written statement.

Union representatives argue that the move bypasses established mechanisms of social dialogue, particularly the Economic and Social Council, where major reforms are typically coordinated with social partners.

In their view, the bill represents not an emergency intervention but a sweeping structural overhaul presented without sufficient consultation.

“We strongly oppose all the suggested measures, as they are leading to the dissolution of solidarity based social system, and to the drastic reduction of the quality of life in Slovenia. Moreover, the changes would benefit only the richest, and the bill for funding them would be paid by society as a whole,” the executive secretary of the association, Matija Drmota, said in the statement.

Union representatives also challenge the premise that Slovenia is facing a domestic economic crisis requiring such measures. Any current pressures, they argue, stem largely from external shocks, including geopolitical tensions such as the war in Iran and the resulting rise in oil prices, which could feed into inflation. Only a small portion of the bill, they say, directly addresses these issues.

Instead, unions contend that the proposal risks creating a significant hole in public finances. Estimates suggest that lower taxes and social contributions could reduce social security revenues by as much as €1bn, without clear mechanisms to offset the shortfall. This, they warn, could weaken funding for healthcare, pensions and other public services.

Critics are particularly concerned about provisions such as the introduction of a cap on social contributions for high earners—affecting less than 1% of workers—as well as tax reductions for rental income and the expansion of self-employment.

These measures, unions argue, could encourage precarious work arrangements, including bogus self-employment, while doing little to address underlying issues in the housing market or labour productivity.

The proposal to allow full pensions alongside continued employment has also drawn scrutiny. While supporters see it as a way to retain experienced workers, opponents warn it could strain the pension system if not carefully calibrated.

Structural problems

More broadly, the association rejects the economic assumptions underpinning the bill. They argue that Slovenia’s challenges are not primarily linked to its tax burden but to structural factors such as limited investment in research and development, low levels of innovation and slower adoption of new technologies—trends seen across much of the EU.

By focusing on tax cuts rather than targeted investment, they say, the draft law risks addressing the wrong problem.

Delo also commented recently that the measures proposed in the Act on Intervention Measures would have a direct impact on the pension fund, and not a minor one. According to rough estimates, they could deepen the pension system’s deficit by around €500mn.

There is also a risk that Slovenia could be required to return part of the EU funds it received under the Recovery and Resilience Plan linked to its pension reform, should the changes undermine previously agreed commitments.

Alenka Bratusek, currently serving as minister in charge of current affairs, said the Act on Intervention Measures for the Development of Slovenia is not interventionist in character.

She argued that the draft contains only two provisions that could be considered urgent measures: a reduction in VAT on basic food basket items and targeted steps in the energy sector, according to RTV SLO.

As political negotiations remain stalled, the fate of the bill is uncertain. Without a functioning government, its passage could prove difficult, yet its introduction has already set the tone for the next phase of Slovenia’s political debate.