ZAGREB, May 24, 2018 – Finance Minister Zdravko Marić said at a government session on Thursday that last year’s budget revenues totalled 122.7 billion kuna, 5% more than the year before, which was owing to positive economic trends and the tax reform, while budget expenditures were lower than planned.
The growth of budget revenues was owing to an increase in GDP of 2.8%, prompted by yet another record tourist season, the growth of household consumption, exports and investments, notably private ones, which grew by more than 7% on the year, Marić said while presenting a report on the budget execution and a report on the application of fiscal rules in 2017.
The minister stressed that the good fiscal and economic indicators were owing to the tax reform and some other steps taken to improve the investment and business climate.
The growth of budget revenues in 2017 was mostly owing to an increase in tax revenues, which totalled 75.2 billion kuna. Income tax revenues were 9.7% less than in the year before, a change that was owing to lower income taxes. Profit tax revenues were 15% higher, totalling 8.2 billion kuna. VAT revenues amounted to 47.6 billion kuna, 5.3% more than in 2016. Revenues from special levies and excise taxes grew 2.6% to 15.1 billion kuna.
Revenues from contributions were 23.2 billion kuna, 4.6% more than the year before. Revenues from aid, with revenues from EU funds accounting for most of it, reached 8.5 billion kuna, an annual increase as well.
Budget expenditures last year totalled 125 billion kuna, an increase of 4% but less than originally planned.
“This is owing to strong fiscal discipline and responsible spending of budget money,” said Marić. He said that results were good despite several occasions when extra outlays in the amount of more than 1.5 billion kuna, for transfers to the health system, were approved.
Marić stressed that last year debt interest was cut by one billion kuna. “Over the past two years, Croatia has managed to reduce interest expenditures by two billion kuna, and one should continue working on that,” he said, explaining that this was owing to the financial restructuring of the road sector’s debt.
Household benefits, the most important category of expenditures, totalled 45.8 billion kuna, of which 37.7 billion kuna went for pension allowances.
Marić stressed that the expenditure growth rate was lower than the potential GDP growth, in line with the Fiscal Accountability Act. He said that planned budget expenditures had not been exceeded for the second consecutive year despite challenging situations.
The result is by about 2.1 billion kuna better and better results were also achieved by extra-budgetary users and local government units, said Marić.
The surplus of the consolidated general government in 2017 was 2.7 billion kuna, which is the first time a surplus was recorded since record-keeping about those statistics started, while the projection was a 2.2 billion deficit kuna, said Marić. “The result is thus better by about five billion kuna,” said Marić.
Owing to this, 2017 saw a continuation of a decrease in the share of public debt in GDP, and at the end of 2017 it totalled 78%, which is almost six percentage points down from the previous year. “Regardless of the fact that public debt is still above the 60% of GDP set by the Maasticht criteria, the share of public debt in GDP has been going down almost at twice the rate prescribed by those criteria,” said Marić.
The government on Thursday also adopted a proposal on the amount, payment terms and payment deadlines regarding profits of companies of strategic and special interest to Croatia for 2017, to be paid into the state budget in 2018.
Minister Marić said that there were several companies that were exempt from this decision – Hrvatske Ceste, Hrvatske Autoceste, Hrvatska Kontrola Zraćne Plovidbe, HŽ Infrastruktura, Hrvatska Poštanska Banka, Jadrolinija, Zračna Luka Dubrovnik, Croatia Airlines, Odašiljači i Veze, Zračna Luka Split and Državne Nekretnine.
“This decision envisages the payment of 60% of the profit after taxation for 2017 by state-owned companies into the state budget in 2018,” Marić said. The only exception from this decision is the Agencija Plan company, which is to pay 100% of its post-tax profit into the state budget.