Fiscal decentralization in the Republic of Slovenia: an opportunity for the property tax

Abstract

PurposeThe purpose of this research is to show how the Slovenian government has recognised the need for local government fiscal autonomy and to enhance this has instigated the introduction of an ad valorem property tax. Since independence in 1991 Slovenia has embarked on a path of administrative and fiscal decentralization. Local government has been subject to significant reform in terms of the creation of additional municipalities and the allocation of devolved expenditure responsibilities.Design/methodology/approachThe paper provides an in‐depth analysis of central and local government statistics to demonstrate the potential role of the property tax in any future decentralisation of responsibilities and funding to the local level.FindingsThis study finds that in terms of both municipal revenue and expenditure there remains a high degree of centralised control by the state. On the positive side with the introduction of the new property tax there is an expectation for greater local fiscal autonomy, however, on the negative side progess towards the introduction of the new tax has been extremely slow. The study concludes that while the proposals are likely to provide for a more stable and uniform local tax, there appears to be lethargy in implementing the property tax.Originality/valueIt is argued in this paper that accession to the EU has created pressures for Slovenia to adopt a financing model which gives greater fiscal autonomy to local government. Currently, the high level of centralization is seen as a barrier to greater devolution of powers which in turn has a negative effect on the introduction of the new property tax.