A set of tax bills presented in Parliament by Finance Minister Zdravko Maric sparked a heated debate on Thursday with opposition MPs saying the proposed tax breaks would only work to increase the incomes of already wealthy Croatians.
The largest opposition party, the centre-left Social Democratics (SDP), said that the government was increasing salaries for “the elites.”
“These tax changes are inappropriate at this time… While our people are emigrating on a daily basis, the government has decided to raise the net salaries for Plenkovic’s elite of some 20,000 people in the country. Those making more than 17,000 kuna (€2,288) net a month will now make even more money, while others will get nothing. This is a disaster, and we must talk about it,” said MP Gordan Maras (SDP) after Maric’s speech on the new tax plan.
MP Pedja Grbin (SDP) also criticised the government’s bills.
“Do you think that it is socially more acceptable to give tax breaks to some 20,000 people who are already making more than 17,000 kuna net, rather than support SDP’s proposal to raise the non-taxable portion of salaries from 3,800 kuna (€511) to 5,000 kuna (€673), which would help about two thirds of Croatians, those whose salaries range from 3,800 kuna up?” Grbin asked Maric.
Maric explained that raising the non-taxable portion would simply not be applicable to a vast majority of tax payers.
“On the other hand, income tax revenue is collected by local and regional government authorities, and this proposal would be a great loss for them,” Maric said.
In his opening statement, Maric said that the proposed set of nine bills have now been submitted for a second reading, and that they represent a third round of tax relief as part of the wider tax reform launched in January 2017.
The bills now up for debate include changes to the VAT, property sales tax, excise tax, profit tax, income tax, mandatory contributions paid for by all employed persons in the country, and the general tax law.
“In the first round of tax relief laws, the overall tax burden was reduced by a total of 2.3 billion kuna (€309 million), and in the second round by another 1.3 billion kuna (€175 million)… In the present set of bills we propose a further tax cuts worth 3 billion kuna (€404 million), which would bring the total tax reduction over three years to 6.6 billion kuna (€888 million),” Maric said.
Speaking of the most important changes proposed by the bills, Maric said that the lowered VAT rate of 13 percent – as opposed to the standard 25 percent rate – would now be extended to include fresh or frozen meat, fish, fruit and vegetables, eggs, and children’s diapers.
The 13 percent rate would also apply to services and copyright-related rights of writers, composers and performing artist.
The even lower VAT rate of 5 percent which was until now applied to prescription drugs would now extend to over-the-counter drugs as well.
After their passing in Parliament, which should happen by mid-December at the latest, the proposed bills are expected to go into force on January 1, 2019.
Maric said that additional modifications to these bills would be made as part of additional legislation, including those relating to the taxation of tobacco products, a special tax on motor vehicles, and changes to income tax rules, including planned increase in the maximum annual amount of non-taxable bonus income from 2,500 kuna (€336) to 7,500 kuna (€1,000).
(€1 = 7.43 kuna)