Article 112(1) of the Tax Act (Official Gazette of the Republic of Slovenia No 117/2006, as amended and supplemented; hereinafter: Zdoh-2) provides that "A resident who is disabled and has a 100% physical impairment shall be granted a reduction in the annual tax base of EUR 14 971 per year if he or she has been granted the right to foreign care and assistance on the basis of a decision of the Pension and Disability Insurance Institute of Slovenia, the Social Work Centre or the administrative body competent for the protection of combatants and military invalids. "
It follows from the above that only disabled persons with 100% physical impairment are entitled to income tax relief of EUR 14 971 if they have been granted the right to foreign care and assistance on the basis of a decision of the Pension and Disability Insurance Institute, the Social Work Centre or the administrative authority responsible for the protection of combatants and military invalids.
I propose that the above-mentioned income tax allowance be extended proportionally to all disabled persons, irrespective of the degree of physical impairment and whether or not they have been granted the right to foreign care and assistance (on any basis). In order to ensure proportionality, I propose to introduce a federal progressive increase in the tax credit, which would depend on the percentage of physical impairment (i.e. using an exponential function). For persons who are entitled to foreign care and assistance, I propose to introduce an additional income tax allowance, since if the above proposal were to be implemented, the result would be that a disabled person who is not entitled to foreign care and assistance would have the same income tax allowance as a disabled person with the same degree of physical impairment who is entitled to foreign care and assistance.
A similar system exists in Germany, where disabled persons with at least 50% physical impairment are entitled to a special income tax allowance for disabled persons, irrespective of whether they have a right to foreign care and assistance. However, the amount of the income tax allowance depends on the percentage of physical impairment.
The proposal would encourage employers to employ disabled people, as the employer would be able to pay them a given net wage at a lower gross wage, since he would have to pay significantly less (or even no) income tax on the wage. The proposal would also have a positive impact on the lives of people with disabilities, many of whom have low incomes on which they are also liable to pay income tax under the current rules. If the proposal were implemented, there would be no income tax on the low incomes of people with disabilities, as the income tax allowance is very high. Thus, most disabled people would not have to pay income tax, while others would pay a significantly lower income tax. Of course, other measures are needed to raise the employment rate of people with disabilities, in addition to the implementation of the above proposal.
While the proposal will have an impact on the state budget revenues (lower income tax revenues), I estimate that the implementation of the above proposal will also have positive effects on the employment of disabled people, so that there will be less need for social transfers to those disabled people who are unemployed because they do not get a (suitable) job, which means that the loss of income tax revenues will be recovered over time.