Trade Unions Warn Against Proposed Tax Reform

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Unions say that those with lowest incomes will get very little or nothing.

The proposed tax reform will bring little or nothing to citizens with lowest incomes, said on Monday leaders of the Independent Croatian Unions Krešimir Sever and the Federation of Autonomous Trade Unions of Croatia Mladen Novosel before a meeting of the Economic and Social Council, at which Prime Minister Andrej Plenković and Finance Minister Zdravko Marić introduced the tax reform proposals to social partners, reports Večernji List on November 7, 2016.

“When it comes to income tax, it is clear that those with lowest incomes will get nothing or very little. Even provisions which at first glance look good, such as an increase in deductions for dependents or children and the increase in non-taxable part of income, will have no effect for those with lowest incomes”, said Sever.

He warned that people with an average salary and two children would receive a net increase of 66 kuna. Sever criticized the abolition of the lowest income tax bracket of 12 percent and the reduction of the maximum rate from 40 to 36 percent. “While the world is increasingly promoting the introduction of progressive income taxes in order to decrease social inequality, Croatia will have just two tax brackets which will benefit those with highest incomes”, he said.

When it comes to VAT, he noted that bread and milk were strategic products for the poorest families, families with many children and senior citizens, and therefore VAT should remain lower for these products, as well as for medicines and books.

Asked what the union would do about the Law on Labour, Sever said that the reform of labour legislation can only go in the direction of “de-flexibilization and additional protection of workers”. “There is certainly no more room for further flexibility in the labour market”, concluded Sever.

Novosel expressed his satisfaction with the meeting of the Economic and Social Council had been convened shortly after the formation of Plenković’s government, unlike during the previous government when they had to wait for three months. “We expect that social partners will be able to state their position on the tax reform”, he said.

Novosel also believes that the reform will reverse positive effects for the largest part of Croatian workers, those who receive wages below the average level. “They will get almost nothing, so there will be no increase in spending. Salaries over 14,000 kuna a month are received by only a very small part of workers, and the question is whether they will spent the additional money or save it”, he said.

The trade unions are united in the view that the reform should be “more social and equitable”. It is not disputed that the income tax rate of 40 percent is one of the highest in Europe, but the question is whether it is acceptable that it should be lowered to 36 percent, while workers with lower incomes do not get almost anything, said Novosel. He added that the unions were expecting an increase in the minimum wage.


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