The starting point for our commentary is the wealth of facts, findings, and concrete recommendations provided by the Institute of Macroeconomic Analysis and Development (IMAD) in its report, "Quality of Life 2025 – Development Report" (hereinafter "the IMAD report"), which holds a mirror up to all of us-individuals, society, and the state. It is a mirror we should look into seriously, discuss, and then get moving-moving from words to decisive action.
This time, we are focusing on the key prerequisite for real development in Slovenia: productivity and innovation. We are adding our own perspectives and concrete proposals for urgently needed changes to the recommendations put forward by IMAD.
What does the IMAD report say?
- Productivity is the fundamental prerequisite for development.
- Innovation, not repetition or imitation.
- We need a breakthrough in knowledge and technology-this means more investment in intangible capital, modern technology, research, development, and companies that create high value-added products.
"Higher productivity should be based on backbone and breakthrough startups, products, knowledge, creativity, and a responsive, lean state with a restructured tax system."
Productivity – myth or reality?
What does it even mean to be productive? As Ali Žerdin notes in the Sobotna priloga supplement of the newspaper Delo (commentary published May 17, 2025),
"there are misunderstandings surrounding the concept of productivity. We equate productivity with the age-old slogan that we must 'work harder and better.' We need to work differently, think, and use our imagination and creativity."
This is proven by innovative countries or innovation leaders (identified in the IMAD report as the V1 group-Denmark, Finland, the Netherlands, and Sweden), which have by far the highest quality of life while maintaining high productivity in a qualitative sense, despite working fewer hours than we do.
Innovation – another myth or reality?
Mr. Peter Wostner, who presented the aforementioned report on behalf of IMAD, stated regarding innovation that it
"...stems from the ability to look at the world differently, which can be encouraged through play and exploration."
We would add creativity in connection with education, which we will dedicate a special place to in one of our upcoming posts.
A development model and development policies for the 21st century
The only constant is change. This is especially true in today's rapidly changing times, geopolitical and economic conditions, and the ever-accelerating technological revolution-all of which demand constant, rapid, timely, and effective responses and adaptation to new circumstances.
And secondly, breaking away from mediocrity, which we do not value enough in Slovenia (being successful is undervalued and underappreciated, sometimes even undesirable), must become our guiding principle. We must once and for all replace our constant comparisons and self-satisfaction with merely reaching the average for a given indicator among other EU or OECD members with the ambition to become and remain among the best, among the winners, among the innovative nations. Much like in sports, where we Slovenians are only satisfied with first place and show no mercy to our athletes, why should we have a different standard for our society and our country?
A significant finding from the IMAD report is what (still) are Slovenia's comparative advantages for the manufacturing sector. These are quality, flexibility, and price, rather than, for example, innovation, creativity, knowledge, and numerous other skills (strategic and analytical thinking, problem-solving, and much more). In other words, everything that leads to higher value for our work, and ultimately to higher prices, better business results, higher employee earnings, and higher value-added.
Innovation-driven growth and a developmental breakthrough
IMAD places the transition to innovation-driven growth at the top of its priority development challenges and provides concrete recommendations (source: IMAD report, p. 17), which we at the STF fully support. At the same time, we would like to offer for consideration a few very specific, necessary changes in the following areas: taxation, the provision of public services, and development and science-innovation incentives.
Tax system
The tax system must be simple and transparent, and any changes must be strategically thought out. The changes we have witnessed in recent years have in many ways been the exact opposite of what was just stated-they were insufficiently strategic, not comprehensive, and often introduced ad-hoc to suit the political option of the day. We resort far too often to introducing tax breaks, exemptions, and special tax treatments..
At the same time, regarding some changes already introduced (e.g., compensation via options and shares), we miss a greater sense of ambition and desire less half-heartedness in the final solutions. Stability, transparency, and clarity in the business environment, and especially the regulatory environment, are the necessary first prerequisites for the economy to plan development, investments, and hiring. On the other hand, uncertainty arises quickly, which leads both the economy and us as individuals to limit ourselves and hold back on investing and spending. Therefore, we highlight the following as necessary changes for the tax system:
1. Simplification and the simultaneous elimination of exemptions
The tax system must be simple, transparent, and efficient in terms of management and costs for both the state and taxpayers. Numerous exemptions, tax breaks, incentives, and special tax treatments do not contribute to this. Let us highlight a few of our proposals:
- Corporate income tax: abolish or reduce existing tax breaks, and instead implement a lower tax rate for all companies;
- Personal income tax: abolish or simplify the calculation of employee benefits; for example, include holiday bonuses, commuting allowances, and meal allowances in a higher general tax allowance for everyone.
- Assess the justification of taxes that have a very small, even negligible effect in terms of tax revenue for the budget and do not justify the cost of maintaining records and calculations on the part of the state and companies/individuals. It is more sensible to simply abolish such tax categories.
A significant part of the simplifications in the tax system must be aimed at encouraging entrepreneurship and startups: simplifying registration and administration for young companies, introducing the "lean public limited company" (lean d.d.) concept, and creating a supportive environment for investment (investment accounts with fewer restrictions, support for investing in startups).
2. More appropriate taxation and administration of options, shares, and co-ownership schemes
While a step in the right direction was taken in 2024, it still comes with too many restrictions and control mechanisms. More favorable tax treatment for stock options should be available to all startups, not just those registered on specific lists (i.e., the register of innovative startups).
3. Targeted wage relief
It is clear to all of us in society, the state, and the economy that preserving the future of the welfare state requires jobs with higher earnings and higher or high value-added. Currently, we do not have enough of these.
The distribution of wages itself (see IMAD report, p. 30) confirms what we have long known: wages in Slovenia are heavily concentrated around the minimum and average wage. Due to the tax wedge, lower wages are growing faster than higher ones.[1]
Therefore, we advocate for capping social security contributions on wages above a certain threshold, adjusting income tax brackets, regularly indexing tax brackets, and increasing the general tax allowance to a level that covers basic living costs. At the same time, this higher general allowance should incorporate other currently "untaxed" employee income (meal allowances, travel expenses, and similar reimbursements).
4. Establishing comparable tax burdens across different forms of work
We have always supported, and will continue to support, the principle that all forms of work require comparable and fairer treatment (based on the principle that "every job counts"). This involves balancing the tax burden on employment income relative to other legal or insurance bases (e.g., flat-rate sole proprietorships, copyright and service contracts, student work). This applies primarily to balancing social security contributions, especially in the service sector.
5. Identifying additional tax revenue sources
To ensure balanced and long-term sustainable public finances, tax and contribution relief requires additional revenue sources. Numerous international statistics and reports from both IMAD and international institutions highlight that property taxation is one of the underutilized or untapped sources in Slovenia. While we do have a tax on citizens' property, the vast majority of taxpayers are exempt, leading to the perception that it does not exist. Secondly, the tax revenue collected from this source is negligible. It may be worth considering an intermediate step, such as adjusting existing conditions to broaden the tax base.
From the perspective of the need for higher-quality investments and investments in intangible capital (see IMAD report, p. 118), we see a potential additional tax source in reviewing or strategically rethinking the corporate income tax (CIT) system. This tax, as confirmed by the latest OECD assessment of Slovenia's industrial strategy, represents a reserve for additional tax revenue due to its base tax rate compared to other countries on one hand, and generous tax incentives on the other. (Source: OECD (2025-05-05), p. 33).[2]
Efficient, simple, and user-friendly public services
We have already presented some simplifications regarding the tax system; here, we highlight the entire field of public services, which should be truly efficient, simple, and user-friendly.
The state must also pursue the goal of higher productivity in public services. Currently, businesses and residents in many areas do not receive the service they need or deserve: unpredictable deadlines, long waiting lines, bureaucratic procedures, and inadequate digitalization are just a few of the daily challenges we face as users.
One of the primary goals of any government should be the simplification and optimization of public service procedures, whether it concerns spatial planning, building permits, the employment of foreign nationals, healthcare, the judiciary, or notaries.
That is why our key message is that
digitalization without the user is not digitalization.
Furthermore, we must connect, simplify, and bring existing solutions closer to the people. Today, we have numerous digital services that could improve people's lives, but they are often unknown to us or scattered across various websites. It is time to put the user experience at the forefront, measure it, monitor it, and continuously improve it. This is not just a technical challenge, but above all, a strategic decision.
Development and scientific-innovation incentives
Smart investment, investing in quality jobs with higher or high value-added-in short, quality investments-should become the first and only criterion for the many development and scientific-innovation incentives.
It would be appropriate to tighten the conditions for granting such incentives while simultaneously setting clear, measurable goals to better track the actual effects and results achieved by recipients, as well as at the level of the economy and society as a whole. This would also increase transparency.
It is also necessary to point out that funding through financial incentives (defined as investment in SMEs with TRL7+ maturity) has been highly problematic over the last three years. There have been no innovation calls. The Eureka incentive has been virtually non-existent for three years, Eurostars is similar, R&D for the economy has been delayed for several years, and demo calls face a similar fate, with current data showing significantly smaller budgets than in the past. We can conclude that this type of funding is far from the predictable constant that the economy needs. In short, there has been noticeably less of this type of funding in recent years, and when it does exist, bureaucratic hurdles and the pace of funding remain extremely high.
Concluding thought
A knowledge-based society, which should be our primary and most important value; a winning mindset; working smarter, not harder; supporting breakthrough entrepreneurial ideas; taking risks and knowing how to take responsibility; and, above all, adopting more ambition and self-confidence from innovative nations.
This is what we wish for each of us, especially for all those who shape, influence, and adopt policies, measures, and regulations.
Many of the mentioned proposals are achievable, and a policy of small steps can lead us to the desired progress. However, there are also those that require more time, careful and reasoned consideration, and, above all, dialogue with all stakeholders.
What is concerning and does not provide a sense of certainty in these very uncertain times is the opinion among some political party representatives that we are already deep into the pre-election period, which means that no changes—including the recommendations from the IMAD report—can be implemented. Some of these are so-called "low-hanging fruit," meaning they could be resolved quickly and effectively to remove bureaucratic hurdles and simplify procedures. All for the sake of greater productivity of the state and the economy, for greater competitiveness, and for a real developmental breakthrough for Slovenia. On the other hand, we are seeing ad-hoc proposals that may be popular with voters.
Therefore, we hope and wish that we will not just stop and wait for next spring, for next May-to put it poetically-that is, waiting for a new government. That is almost a year away. It is a long time, too long, because the competition does not sleep, and the world and geopolitics keep moving forward.
We look forward to your feedback and constructive debate.
Barbara Krajnc, Director of the Slovenian Technology Forum, GIZ
Sources and Literature:
- EC. (2025) Recommendation for a COUNCIL RECOMMENDATION on the economic, social, employment, structural and budgetary policies of Slovenia. Retrieved from https://commission.europa.eu/publications/2025-european-semester-country-specific-recommendations-commission-recommendations_en
- MF. (2024) Legal Income Tax Information for 2023. Ljubljana. Obtained from
https://www.gov.si/assets/ministrstva/MF/Davcni-direktorat/DOKUMENTI/Informacija-o-davku-od-dohodkov-pravnih-oseb-za-leto-2023.pdf
- OECD (2025-05-05), “A review of Slovenia's industrial strategy: Policies for a green, innovative, and smart economy”, OECD Science, Technology and Industry Policy Papers, No. 177, OECD Publishing, Paris. http://dx.doi.org/10.1787/f10e4ef9-en
- IMAD. (2025) IMAD Report on Quality of Life in Slovenia — Development Report 2025. Ljubljana. Retrieved from https://umar.gov.si/fileadmin/user_upload/razvoj_slovenije/2025/slovenski/POR_2025.pd
[1]To be more concrete, here are a few figures: according to IMAD data, one percent of employees earn a gross monthly wage of 7,000 euros or more. On the other hand, the IMAD report indicates that 64% of the workforce earns a minimum or average wage. To this, we add the approximately 30% of employees with foreign citizenship who earn the minimum wage. These data are for the first quarter of 2025.
[2]The Ministry of Finance's analysis of corporate income tax for 2023 is significant, as it shows a reduction in the tax base and tax credits totaling EUR 2.583 billion, the largest portions of which were for loss carryforwards (nearly EUR 900 million) and investment incentives (EUR 963 million). We highlight this in light of IMAD's findings and recommendations, which note that we are still investing too much in buildings and machinery, and too little in ICT (software, databases, analytics, and related products), human resources, organizational capital, industrial robotics (where we are losing an advantage we once held), automation, and private R&D aimed at higher value-added products (Source: IMAD Report, p. 118).
