At the coalition summit, we first presented the facts about the state of public finances to the partners. The intention was to specifically point out that the last three years have been extremely challenging for public finances. Statutory expenditure in all general government budgets has increased considerably, with much of it designed to be permanent.

In our status analysis, we pointed out that the introduction of a number of amendments and exemptions has made tax laws non-transparent. Our guiding principle in preparing the starting points for a comprehensive reorganisation to address the challenges of the existing tax system is to ensure a balanced distribution of tax burdens and to provide the foundation for financing (growing) social needs for the future decades.

Over the past 17 years, tax legislation has been subject to a number of partial revisions. These have introduced a significant number of anomalies into the system which reduce its predictability and transparency.

The purpose of the tax system reform is therefore to modernise tax laws, remove inconsistencies and ambiguities, and above all put the personal income and property tax systems first. Both areas have been in need of a comprehensive reorganisation for a long time.

Taxation of real estate property is nothing new, as most real estate is already subject to a fee for the use of building land (NUSZ). The law governing this taxation was adopted in 1988. Based on the decision of the Constitutional Court of the Republic of Slovenia this law is no longer in force, but is still applied (temporarily). We therefore want to put the taxation of real estate on a new footing, where, instead of the current non-transparent scoring of real estate, tax will be assessed on the basis of the value of the real estate.

As regards the personal income tax system, we wish to return to the fundamental tax principles and ensure that tax is paid according to economic power. The ultimate objective of the reform is to establish a basis for imposing the burden on taxpayers according to their net disposable income. The current system largely allows or even encourages tax-motivated decisions by taxpayers, which lead to unequal tax treatment. The existing social transfer system all too often additionally rewards such behaviour.

In recent years, tax policy has failed to follow public spending dictated by the growing needs of society. Without a system reform, the gap between the collected tax and society's needs for public services will become even wider. In the last decade, European Union Member States have on average increased the share of taxes and contributions in gross domestic product, while Slovenia has on average maintained the same share or even decreased it.

It is true that Slovenia is at the top of the scale of collected social contributions as a share of gross domestic product among OECD countries, but it should be pointed out that these are funds that are allocated to citizens' rights and services. Despite the high wage burden, a further two billion euros per year must be provided from the budget to cover a wide range of rights.

For many years, international organisations have been warning us about the low tax on capital in terms of the competitiveness of the tax system, bearing in mind that our restructuring possibilities are limited by the potential of individual taxes.

The aim of tax legislation reform is to ensure a system that is resilient, simple, transparent, understandable and predictable to the maximum possible extent. In any case, we are aware that tax policy is closely and directly connected with the country's policies in the economic, social, labour law and other areas, which will also influence the final amendments to be introduced. Major changes of the tax system have a wide impact, which is why a thorough debate and intensive cooperation with special-interest groups are needed.