Strengthen integration of refugees and migrants. Boosting labour market participation and employability of foreign-born individuals and their children will help to foster inclusive growth, reduce social spending and expand the tax base.
Actions taken: In 2018 a plan to combat the prevalence of deprived neighbourhoods was adopted. Municipalities are not allowed to move people receiving social assistance into these areas, children are required to attend day care from the age of one and resources are allocated to modernise social housing.
Recommendations: Mitigate barriers to employment posed by high entry wages by improving the integration training programme and further involvement of social partners and civic society. Take steps to better co-ordinate language training, education, subsidised work and recognition of foreign competencies within municipalities and spread best practices across municipalities. For second generation immigrants, implement a broad integration strategy in the education system.
Shift the tax structure towards immovable capital. Moving taxation away from personal income to housing would bolster work incentives and reduce tax distortions across asset types.
Actions taken: A property tax reform was approved in 2017 and will become fully effective in 2021. It includes a new system for housing valuation and replaces a nominal freeze of property taxes with proportional taxation, maintaining a progressive element for the most valuable homes.
Recommendations: Shift the tax burden further away from labour and corporate incomes by raising the property and land tax rates and by reducing tax deductibility of interest expenses.
Reduce distortions in the housing market. Housing subsidies and rent regulation distort and hamper growth of the private rental market, reduce labour mobility and puts upward price pressure on house prices in the largest cities.
Actions taken: No action taken.
Recommendations: Ease rent regulation and reduce housing subsidies to support a better utilisation of the housing stock and a larger supply of rental flats. Improve targeting of housing subsidies by relying more on in-kind support for students and social housing in general.
Strengthen competition. Enforcement of competition, particular in some service markets, is complicated by the complexity of the competition framework, hampering productivity growth.
Actions taken: Taxi market regulation has been liberalised from January 2018 and restrictions on licenses will be fully lifted by 2020. A strategy to enhance public procurement, including quantitative targets, better access for smaller firms and reduced transaction costs for firms was announced in May 2018.
Recommendations: Streamline the institutional setup and procedural system for the competition authority to allow for effective enforcement. Simplify the complex and lengthy court procedures, for instance by allowing the competition authority to issue administrative fines within the constitutional limits. Develop clearer standards for exemptions from the Competition Act and involve the competition authority in their determination. Implement the public procurement strategy.
Improve the efficiency of the education system. Enhancing quality and aligning education better with future labour market demands would improve human capital accumulation and boost productivity growth.
Actions taken: A tripartite agreement between the government and social partners in 2017 includes measures to improve quality of adult education, training and upskilling and make it more flexible and accessible, including through a digital one-stop entry platform.
Recommendations: Improve the quality and relevance of vocational education to boost enrolment. Develop VET programmes that reflect future structural changes in the economy and offer pathways to higher education. Evaluate the supply of tertiary education to simplify and reduce the large number of entries and provide clear information on employment opportunities for prospective students. Reduce student grants for tertiary education and rely more on student loans. Link repayment conditions to subsequent income and labour market status.
