ZAGREB, August 20, 2018 – The “Lipa” association of Croatian taxpayers has called on the government to withdraw its proposal for draft amendments to the legislation on salary contributions, explaining that the cause of “the artificially created problem” lies with different tax rates on income and profit and urging the equalising of tax rates.
“Prescribing the mandatory minimum requirements for salaries of directors/executives, small business owners and self-employed owners leads to an increase in the tax burden on small and micro businesses, and makes it more difficult for companies to start operating, and also represents the retrograde thinking from the times when arbitrariness of planned economy was in effect,” the association said in a press release issued on Monday.
This past Thursday, the finance ministry put to public consultation draft amendments to a set of tax laws, including the draft bill of amendments to the contributions laws. The ministry thus proposes the increase of the coefficient from 0.65 to 1.1 that will be multiplied with the average salary for the purpose of establishing the monthly base for the calculation of how much should be paid in contributions for insurees who have a contract with the employer and who sit as managers or executive directors on boards of companies owned by that employer.
Amendments to law on contributions bring no changes for SMEs, Fin-Min says.
Finance Minister Zdravko Marić said on Saturday a bill of amendments to the law on contributions was aimed at preventing abuse observed in recent years and that the changes did not apply to company board members and directors who were permanently employed and worked full time, and that there would be no changes for small and medium-sized enterprises.
Speaking to reporters, Marić said the abuse was evident in the fact that many board members and directors were reported as working for minimum wage and part time.
There are some 175,000 board members today, directors of various kinds of companies, and only 460 are reported as board members, yet they are not employed by the company in question, and about 65,000 are employed by the company, Marić said. The remaining 100,000 are board members and directors who have full pension and health insurance based on their employment in another business, he added.
Commenting on criticism that the bill was anti-entrepreneurial, Marić reiterated what the incumbent government had done for entrepreneurs, including a profit tax cut from 20% to 18%, and 12% for SMEs. He also reiterated that the bill was drawn up to stimulate ICT engineers to stay in Croatia as well as attract international experts.
Under the bill, when a business owner pays a board member or employee a bonus in the form of profit sharing or equity, this kind of income will no longer be taxed as salary income but capital income, Marić said.
