Finance Minister Marić: Taxes Will Be Lower Starting from January

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Finance Minister Zdravko Marić will probably remain as minister in the new government as well.

Finance Minister Zdravko Marić, who is expected to retain his position in the new government, said on Saturday that the aim of the planned tax reform was to increase disposable incomes of citizens and to reduce costs for businesses and households, reports Večernji List on September 19, 2016.

“Lowering taxes on salaries and an increase of the non-taxable part of income to 3,700 kuna a month, as well as the expansion of tax brackets and lowering the maximum income tax rate which will be applied only to incomes above 20,000 kuna a month, are parts of a comprehensive tax reform”, said Marić. The goal of these changes to the income taxes is to increase disposable income for the majority of citizens, including highly educated people such as physicians, engineers and IT experts, who are leaving Croatia in large numbers and finding higher-paying jobs in other EU countries.

Marić also announced plans for the reduction of the corporate tax rate from 20 to 18 percent, while farmers, craftsmen and small businesses, whose revenues on an annual basis do not exceed 3 million kuna, would pay corporate taxes at a rate of 12 percent. “We also intend to reduce the VAT rate by 1 percentage point, when the conditions are met. In doing so, we will also define goods and services which will have even lower VAT rate”, added Marić. Furthermore, to reduce costs for businesses and households, particularly for the most vulnerable citizens, there are plans to introduce a reduced VAT rate on certain utilities, in particular for electricity.

In addition to this, there will be dozens of other changes to the tax system, which will make it simpler. Drafts of new laws are mostly ready, said Marić, and the plan is for them to be adopted in Parliament as soon as possible so they could come into effect starting from 1 January 2017.

Talking about the state budget for next year, Marić said that it would be a turning point for Croatian public finances which should continue positive trends from 2016, which will enable the country to leave the excessive deficit procedure and improve its credit rating. Therefore, in 2017 the focus will be on controlling the expenditure side of the budget. “Our plan is for the general government budget deficit to be reduced to 2 percent of GDP in 2017, which would further contribute to the reduction of public debt to GDP ratio”, he said.

According to recent Eurostat data, at the end of the first quarter Croatian public debt stood at 288.35 billion kuna, which is 4.7 billion kuna less than a year before and the first decline in the public debt on an annual basis since such data has been monitored. According to the European statistical office, the public debt to gross domestic product ratio stood at the end of the first quarter at 85.8 percent, while a year ago it was 89.1 percent.


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