engleski

Reform of Child Tax Reliefs and Child Benefits in Slovenia

The idea (or principle) of universality of child benefits - which are one of the most important family-policy measures - is justified and welcome only if it is not associated with such a low benefit level that it does not make much sense neither for the poor nor for the rich. In a situation where funds are limited and many families need the support to cover their minimum costs of living - as is the case nowadays in all European countries in transition -targeting of child benefits to families in the greatest need seems to be the only reasonable option. The general situation in Slovenia is not that bad, as compared to the pre-transition period, as it is in other countries in transition. Consequently, lowering of the income threshold for the entitlement to child benefits would not be justified if it were not accompanied by a new form of child tax relief the lump-sum tax credit per dependent child, which transfers more income to middle-income families. The positive proposed step is also the removal of the child benefit's linkage to the so called guaranteed wage. This guaranteed wage used to be the lowest possible pay for a full-time job in Slovenia. Since it had lost its connection to the labour market it has remained a basis for determining the level of social benefits. In 1991 it amounted to 43% of the average gross wage, and since then the ratio of the guaranteed minimum wage to the average wage has been falling constantly, amounting to 25% by the end of 1997. Until the mid-1997 the government had a discretionary right to adjust the guaranteed wage level, and during that period the real value of the guaranteed wage decreased considerably, affecting, of course, the real value of a child benefit as well. An increase in both child benefits and tax savings for low- and middle-income families with children may be understood as a temporary way of solving the urgent issue of the guaranteed minimum income in Slovenia. Generally, the right to a guaranteed minimum income is universal and is implemented through non-contributory social benefits (social assistance). On one side, minimum income has to be needs-based; on the other, its level is necessarily determined by political decision, taking account of the budgetary restraint and a guaranteed minimum wage (in order to avoid possible disincentive effect for the participation in the labour market). The current level of minimum income in Slovenia is inadequate. It was estimated that the minimum income for a child covers only about one-third of the child's minimum costs of living (mostly food expenses) (Stanovnik and Stropnik, 1997). Until the minimum income is corrected upwards, higher child benefits will contribute to covering a higher share of the minimum costs of living of families on social assistance. This, of course, cannot be a permanent solution. Child benefit should not take over a role of social assistance, because it is a family policy measure aimed at achieving goals that are different from those of social assistance.

child benefit; child tax allowances; child tax credit

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