ZAGREB, September 17, 2018 – The state guarantees issued to the Uljanik shipyard are a risk to the state budget, Finance Minister Zdravko Marić said in an interview with Croatian Radio on Monday.
Asked if the guarantees issued to the Pula-based shipyard posed a threat to the budget, Marić said that one of the threats that was not originally anticipated was enforcement of the collateral granted to Uljanik for shipbuilding and a bailout loan which had for the most part been used for the payment of wages and the functioning of the shipyard in general.
“We have come to a situation where the shipyard is unable to meet its financial obligations. Under contractual commitments, there is a possibility, and ultimately also a risk to the state budget, to enforce some of the guarantees. In the worst case, if the guarantees for all four ships that have been cancelled were to be enforced, the amount would exceed 500 million kuna, which is about 70 million euro. On the other hand, we have a recovery loan which was issued at the start of the year and which matures today, after being prolonged,” the minister said.
Marić said he was in touch with commercial banks in search of a solution. Asked which banks were prepared for a compromise, he said he would not want to speak in their name and that this would be clear from their reactions.
He reiterated that the government had decided to cover the July and August wages of the Uljanik workers. “This has been done, but the question is what next,” he added. “It is my responsibility to look at things from the perspective of taxpayers,” the minister said.
Marić said that public consultation on the tax reform had ended and that 605 complaints had been submitted to date. “We will address all comments, suggestions and proposals, but most of them refer to the same thing – the law on contributions.” The minister said some of the proposals included lowering the standard tax rate from 25% to 13% for fresh meat, fish, fruits, vegetables and diapers, adding that in this round of consultations, fresh eggs were added to the list.
The minister said he had discussed a set of laws with the coalition partners, the Employers Association, the Croatian Chamber of Commerce, unions, etc. “The government will discuss the set of laws at its session,” the minister said without disclosing whether that would happen this week or next.
The Croatian Employers’ Association (HUP) on Friday presented its own proposal for tax reform to Minister Marić, calling for applying the lower tax rate to additional categories, reducing the income tax rates and cutting the profit tax rate to 12 percent for all businesses.
The HUP believes that the forthcoming third round of tax reform should primarily focus on further relieving the tax burden on the economy and entrepreneurship, which would pave the way for higher wages and retaining the labour force.
Employers are proposing that the lower VAT rate should apply to additional categories, including non-prescription drugs, fresh and frozen meat products, dairy, bee and heating products, newspapers and magazines, public transport, housing renovation, marinas, hotel accommodation and restaurant services. The current tax reform proposal envisages reducing the VAT rate from 25% to 13% on fresh meat, fresh fish, fruit, vegetables, and diapers.
Employers also want the profit tax rate reduced to 12% for all businesses. Currently, the general profit tax rate is 18%, while small businesses, or ones with an annual income of up to 3 million kuna, are subject to 12% tax.
They recommend reducing the existing income tax rates from 24% to 14% and from 36% to 30%, saying that this will help increase wages and provide additional impetus to retain labour in Croatia. The current income tax rate of 24% applies to monthly incomes of up to 17,500 kuna, while incomes above this amount are subject to 36% tax. The government proposes that the 36% rate apply to monthly incomes of 30,000 kuna and over.
The HUP believes that it is also necessary to ease the tax burden on total wage costs.