HDZ and MOST Finally Agree on Tax Reform

Total Croatia News

The two ruling parties have apparently solved their differences and supported the tax reform at today’s meeting of the cabinet.

After today’s meeting of the cabinet, Finance Minister Zdravko Marić spoke about the final proposal of tax reform, which has been agreed to by both HDZ and MOST. According to media reports, HDZ has accepted some of MOST’s objections and agreed to certain changes in the proposals, reports Jutarnji List on November 10, 2016.

“At the beginning, I would like to point out that this was just the third meeting of the new cabinet and we have already adopted a package of 15 laws, of which seven are completely new laws. This is the largest tax reform ever in Croatia. The proposals have been published on the Ministry’s website and the public consultation period has started. Majority of changes will come into effect on 1 January 2017, while some will be a bit delayed. Irrespective of the no confidence vote against the previous government, we have continued working on the proposals and I would like to thank everybody who was involved in the process. The deadlines are short, but viable. I look forward to the debate in Parliament. In the area of ​​direct taxation, this tax reform shows that in the first year we expect to open at least 6,500 new jobs, while the second effect will be an increase in consumption which will raise GDP by 6 billion kuna,” said Marić.

One of reporters’ questions was about whether the VAT tax rate in tourism would be increased. “I know there were doubts, but VAT for accommodation services remains the same. Cafes and restaurants will return to the rate of 25 percent. Nobody is even thinking about destroying our tourism industry, but there is still room for improvement. Restaurant and catering sector can feel affected, but it is important that people’s disposable incomes will also grow. As for the overall effect, it is not such that it could jeopardize anything”, responded Marić.

“As for electricity prices, this is one of the ways for people with smaller incomes to also feel the benefits of the reform. Electricity bills should be lower. To sum up, the net effect is 350 million kuna. An increase in VAT for bread, milk and medicines has not been foreseen for 2017, but only for 2018. These changes we made today will not jeopardize the overall tax reform”, said Marić.

The Finance Minister was also asked about the effect of American presidential elections on Croatia’s financing on global financial markets. “We know the outcome of the election. You saw the reaction of markets which have rapidly stabilized. We have solved all our financing needs for this year, and next year we plan to further reduce the public debt. Do not worry, we are taking into account the situation on the markets.”

“This tax reform is aimed at improving the entire economy. That is the basic principle and idea. I would not like to speculate on hypothetical and negative scenarios. I stand by my projections and I have the support of the entire government for this reform”, concluded the Minister.


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