Economic experts of the two parties compare their economic policies.
Whoever wins the upcoming elections, HDZ or the SDP-led People’s Coalition, there will be changes to the tax system. On the other hand, neither HDZ nor SDP will rush with the introduction of property taxes or with the introduction of the euro, reports Jutarnji List on August 18, 2016.
These are the conclusions from the debate “Fiscal Consolidation, Public Debt and State Property Management”, which was organized on Thursday at the Croatian Employers’ Association offices in Zagreb. Party representatives were former Finance Minister Boris Lalovac (SDP) and economist Tomislav Ćorić (HDZ).
Both HDZ and SDP agree that there is a need to continue with the process of fiscal consolidation and reduction of public debt. Both parties also agree about the need to improve management of state property and highlight the importance of political stability for the position of Croatia at international financial markets.
However, there are differences with planned changes to the tax system. HDZ promises to reduce the regular VAT rate, which now stands at 25 percent, in 2018, which they believe would encourage the fight against “gray market”, which would compensate the reduction in budget revenues. They also promise the reduction of corporate tax, from 20 to 18 percent. Also, HDZ plans to make changes to the income tax, whose highest rate should not exceed 36 percent, while the tax bracket in which income is taxed at a rate of 25 percent would be widened. There would also be an increase in the non-taxable part of income. This would increase purchasing power and stimulate consumption. “Given the situation, it is necessary to relieve the tax burden on labour and capital”, said Ćorić.
On the other hand, SDP would not change the regular VAT rate. SDP puts emphasis on the increase of the non-taxable income, to 3,000 kuna a month from the current 2,600 kuna. They would also reform the tax brackets, so that the majority of tax payers would belong to a lower tax bracket, which would mean they would have more spending money. SDP also believes that the government should step up efforts to reduce “gray market”. They put emphasis on the importance of savings in the state budget. “Income tax rate of 40 percent is disastrous compared to the rest of the region. This group mainly includes highly educated people, especially in export-oriented companies. We should stop them from leaving the country”, said Lalovac.
As for property taxes, SDP say they would not introduce it. Lalovac said that at this moment necessary preconditions did not exist, particularly because the property registry has not been brought up to date. HDZ also agree that it is necessary first to reform the property registry, and only then they would introduce the property tax, which should not differ from the current utility charge and would not burden those who own just one property in which they live. However, the new tax would represent a burden for those who have more properties, which would be an incentive to put them to use”, said Ćorić.
Analyst Hrvoje Zgombić said that the tax burden on Croatian businesses was too much. “Many people here have the option to either work illegally or to not work at all. Taxes are enormous”, said Zgombić, warning also that there are too many changes being done to the tax system.
“This is the first election in which the focus of populist promises has switched from the expenditure side of the budget to the revenue side”, said analyst Velimir Šonje.
