RRZ: Slovakia’s Labour Tax Burden to Hit Record High, One of EU's Highest

Bratislava, 9 October (TASR) – Taxation on labour in Slovakia has been steadily increasing and is set to reach a record high in 2026, making it one of the highest in the European Union (EU), with the Council for Budget Responsibility (RRZ) warning that labour taxation in Slovakia will exceed the EU average by nearly one-fifth next year. In a report released on Thursday, the RRZ pointed out that most of the public finance consolidation from 2024 to 2026 will rely on increasing tax revenues. In 2025, tax revenues are expected to reach 36.8 percent of gross domestic product (GDP), up by 1.2 percentage points year-on-year, with a slight further increase projected for 2026. „Revenues from labour taxes, including social and health contributions, will exceed 20.5 percent of GDP in 2026, forming the largest component of the state budget income,” the RRZ stated. The council noted that comparing labour taxation across countries is complex due to varying taxation systems for different family types. For accurate international comparison, it is necessary to use an average effective rate — known as the implicit tax rate — which compares taxes and contributions paid by employees with their gross earnings. „In Slovakia, this implicit rate has long been rising, from 35.1 percent in 2004 to 38.1 percent in 2023. According to RRZ estimates, it is expected to reach a record 39.8 percent by 2026. This would be the highest rate among V4 countries and one of the highest in the entire EU,” the Council noted. With the EU average at 34.1 percent, Slovakia would be 5.7 percentage points above this level. The trend is attributed not only to a lower share of wages in GDP but also to the structure of the tax and contribution system, which consistently increases the burden on labour through system parameters and consolidation measures. Since 2023, these measures have included a 2 percentage point rise in health insurance rates, higher caps for social security contributions, and the introduction of two higher income tax brackets. The RRZ says this trend contradicts recommendations by the Organisation for Economic Co-operation and Development (OECD) and the European Commission, which advocate shifting the tax burden away from labour towards consumption, property, or environmental taxes. In Slovakia, however, the burden remains focused on labour income, while taxation on capital and consumption remains below average, the council added. mf