Slovenia Corruption Report

Last updated: May 2018

Snapshot

Corruption is a risk for businesses operating in Slovenia. The overlap between business and politics has a particularly damaging effect on public procurement. Many public officials engage in corruption with impunity, and corruption scandals recently culminated in political instability and the eventual fall of the government. Slovenia’s Criminal Code establishes a strong legal framework to mitigate corruption, criminalizing extortion, passive and active bribery and money laundering, among other offenses. However, enforcement is limited and hampered by political influence. Even though facilitation payments, gifts, and hospitality (with the intent of gaining an advantage) are criminalized, businesses perceive bribery as an established way of doing business in Slovenia.

Risk key
Low
MODERATELY LOW
MODERATE
MODERATELY HIGH
HIGH

Judicial System

Corruption is a moderately high risk for companies in the Slovenian judiciary. To obtain favorable judicial decisions, bribes and irregular payments sometimes occur (GCR 2015-2016). Over half of companies indicate they perceive the independence of courts and judges as either ‘fairly bad’ or ‘very bad’; only Slovakia performs worse in the EU (JS 2017). Half of Slovenians perceive abuse of power and bribery as widespread in the court system (EB 2017). Companies also express low satisfaction with the efficiency of the legal framework when it comes to settling disputes and challenging regulations (GCR 2017-2018). The judiciary is generally free from unconstitutional intervention from the other branches of government (BTI 2018). Allegations that the wealthy and influential have received preferential treatment in the court system exist (NiT 2018). However, some influential figures have been successfully convicted in the past few years (NiT 2018). Backlogs are no longer considered a problem (SGI 2017).

Enforcing a contract takes around 1,160 days, which is twice the OECD average (DB 2018).

Slovenia accepts the principle of international arbitration and is a party to the International Centre for Settlement of Investment Disputes (ICSID), the New York Convention 1958 (UNCITRAL) and the World Bank’s Multilateral Investment Guarantee Agency (MIGA).

Police

Corruption in the Slovenian police is a low risk for companies. Civilian authorities maintain effective control over the police through procedures to investigate corruption (HRR 2016). Companies express general satisfaction with the reliability of police services (GCR 2017-2018). Around a third of Slovenians perceive bribery and abuse of power as widespread among police and customs officers (EB 2017).

Public Services

Corruption is a low risk when obtaining public services in Slovenia. Bribes and irregular payments are not frequently exchanged when obtaining public services (GCR 2015-2016). However, seven out of ten businesses indicate that they believe the use of connections and bribery is the easiest way to obtain certain public services (FEB 2017). Two out of five Slovenians believe that officials issuing business permits are corrupt (EB 2017). Regulatory procedures generally align with international standards, but investors have complained about a lack of transparency in economic and commercial decision-making, and consistency in the regulatory structure (ICS 2017). Legal certainty in the country has suffered from frequent changes in legislation and contradictory provisions (SGI 2017). Regulatory impact assessments are frequently of low quality because of limited public input (BTI 2018).

The procedures and time required to start a business are lower than OECD averages (DB 2018). However, dealing with construction permits is almost twice as costly and significantly more time consuming than elsewhere in OECD high-income countries (DB 2018).

Land Administration

There is a moderate risk of corruption in Slovenia’s land administration. Property rights are generally adequately defined (BTI 2018), but companies are not fully confident that the government is able to protect their property rights (GCR 2017-2018). Almost half of Slovenians perceive bribery and abuse of power as widespread among officials issuing building permits (EB 2017). Property may be expropriated in Slovenia in return for financial compensation or compensation in kind in accordance with conditions as determined by the law (ICS 2017). Some disputes over private property expropriated by the former Socialist Yugoslav government remain ongoing (ICS 2017).

The procedures and time required to register property are more than double the OECD average, suggesting bureaucratic hurdles (DB 2018).

Tax Administration

There is a moderate risk of corruption in the Slovenian tax administration. Companies report that irregular payments and bribes are not common in relation to annual tax payments and that they generally don’t expect to give gifts in meetings with tax officials (GCR 2015-2016). There have been reports of a small number of bribery cases involving tax collection (ICS 2017). One in six businesses cite tax fraud or non-payment of VAT as among the most common corrupt practices in Slovenia (FEB 2017). Around a third of Slovenians consider abuse of power and bribery as widespread among tax officials (EB 2017). Tax rates and regulations are cited as among the most problematic factors for doing businesses in the country (GCR 2017-2018); companies have complained about excessive administrative tax burdens (ICS 2017). Slovenia’s VAT gap amounts to EUR 188 million a year lost due to tax fraud and inadequate tax collection systems (EC VAT GAP 2017).

The corporate tax rate is lower than in most European countries, but the time required to deal with tax payments is almost twice the OECD average (DB 2018).

Customs Administration

Corruption in the customs administration is a moderate risk for companies operating in Slovenia. Companies report that bribes and irregular payments sometimes when dealing with import procedures (GETR 2016). Companies indicate that they are moderately satisfied with the efficiency and time-predictability of the clearance process (GETR 2016). Around a third of Slovenians perceive bribery and abuse of power as widespread among police and customs officers (EB 2017).

The cost and time required to comply with import and export procedures in Slovenia are negligible compared to the average among OECD high-income countries (DB 2018).

Public Procurement

There is a high risk of corruption in Slovenian public procurement. Corruption in the procurement sector has also been attributed to the small size of the country’s political and business elite, a lack of transparency and widespread cronyism and conflicts of interest (ICS 2017). Businesses perceive both favoritism in the decisions of government officials and diversion of public funds as common (GCR 2017-2018). More than four out of ten businesses believe that corruption has caused them to lose a tender (FEB 2017). Practices commonly perceived by businesses include collusive bidding and tailor-made bids for certain companies (FEB 2017). Tenders are often poorly advertised and a relatively large share of tenders receivers only a single bid (Opentender 2017). Investors considering bidding on public tenders are advised to use a specialized due diligence tool on public procurement.

A recent example of procurement irregularities involves public investment in the coal power plants TEŠ 6 (NiT 2018). A parliamentary inquiry found that current president and ex-prime minister Borut Pahor, along with a number of other former minister and former prime minister Janez Janša were politically responsible for not following public procurement laws when making the investment (NiT 2018). In another case, Transparency International found that the tendering process for the construction of a second track on the Divača-Koper railway, worth an estimated EUR 1.4 billion, suffered from multiple corruption risks (NiT 2018). These risks included incomplete preparatory documentations, insufficient capacity to monitor corruption risks due to a lack of independent experts, and weaknesses in the public institutions that oversee procurement (NiT 2018).

Legislation

Slovenia has a strong legal framework to address corruption, but enforcement is inconsistent. The government is not effective in enforcing anti-corruption laws, and public officials engage in corruption with impunity (HRR 2016). The Commission for the Prevention of Corruption (CPC) has a poor public image and is seen as ineffective (NiT 2018). The OECD has warned that the CPC suffers from political influence (OECD 2016).

Slovenia’s Criminal Code criminalizes attempted corruption, extortion, blackmail, active and passive bribery (including of foreign officials), facilitation payments and money laundering. There is no threshold for gifts to be considered bribes (CMS 2016). If the offender is an individual, penalties for giving or receiving unjustified gifts and bribery are punishable by up to six years in prison and forfeiture of the bribe value (CMS 2016). Companies may be fined up to 200 times the value of the damage caused or benefit obtained, confiscation, winding up of the company, debarment from participating in public procurement for up to ten years and a prohibition on trading in financial instruments for up to eight years (CMS 2016). The Integrity and Prevention of Corruption Act prohibits the receipt of gifts, bribes and facilitation payments by public officials as well as the supply of gifts, bribes or facilitation payments to government and local bodies and holders of public authorization (CMS 2016). The Public Procurement Act (in Slovenian) requires institutions to follow procurement rules for any contract for goods and services with a value of at least EUR 20,000 and a minimum of EUR 40,000 for works (EUROPAM 2017).

Slovenia has ratified a number of international conventions, such as the Council of Europe Civil Law Convention on Corruption, Criminal Law Convention on Corruption and the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, which is poorly enforced (EC 2015). It has furthermore ratified the United Nations Convention against Corruption (UNCAC). Slovenia participates in several anti-corruption initiatives, such as the Group of States against Corruption (GRECO) of the Council of Europe, the European Partners Against Corruption (EPAC) and the European contact-point network against corruption (EACN).

Civil Society

Freedoms of speech and of the press are guaranteed by Slovenia’s constitution (BTI 2018). There has been a regression in media freedoms in the past 20 years, partly due to economic pressures (BTI 2018). Political pressures on the media remain significant (HRR 2016). Defamation is a criminal offence and news outlets and reporters can legally be compelled to give up their sources (FitW 2015). Journalists are generally free from direct political interference (FotP 2015), but poor working conditions and low wages make journalists vulnerable to pressure and self-censorship (BTI 2018). Slovenia’s press environment is rated as ‘free’ (FotP 2017).

The Slovenian government respects freedoms of assembly and association (HRR 2016). Slovenia’s civil society sector is active in monitoring the government (SGI 2017). Most organizations have considerable policy knowledge and rely on experts but face a decline in public funding (SGI 2017). Slovenia has a strong civil society tradition; it boasts the most civil society organizations (CSOs) per capita in the world (BTI 2018).