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Tax wedge slightly lower last year

Ljubljana, 20 May (STA) - The tax burden on labour costs in Slovenia in 2020 was 40.2%, which is 0.1% lower than the year before. Of the labour costs for a person earning 67% of the average salary, 40.2% went to pay the tax burden, leaving 59.8% as take-home pay, according to the Statistical Office.

The figures are even less favourable for single people. In 2020, the tax burden for a single person without children was 89.4% of the additional gross salary in employment, which means that their net income only increased by 10.6% of their gross salary when moving from unemployment to employment.

This indicator is called the "unemployment trap" by statisticians and reflects the difference in a person's net income as they move from unemployment to employment. This difference is due to higher taxes and social contributions and lower social transfers when in employment, compared to the incomes and higher social transfers when a person was unemployed.

Compared to 2019, the tax burden when moving from unemployment to employment for a single person without children decreased by 1.3%.

In 2020, the tax burden for a single person without children was 50.3% of additional gross earnings at moving to a higher paid job, while for a couple with two children it was 100%; this is called the "low wage trap".

The "low wage trap" indicator shows the difference in net earnings of employed persons when moving to a higher paid job.

The differences are due to higher taxes and social contributions and lower social transfers at the higher paid job, compared to the previous lower paid job with lower taxes and social contributions and higher social transfers.

Compared to 2019, the tax burden at moving to a higher paid job for a single person without children decreased by 0.5%, while it remained the same for a couple with two children.

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