Finance Minister Wants Long-Term Solution for Companies in Trouble

Total Croatia News

ZAGREB, September 1, 2018 – Finance Minister Zdravko Marić told Večernji List on Saturday that the state budget would withstand the payment of costs related to the ailing Uljanik shipbuilding group and the Petrokemija artificial fertiliser producer and that there would be no corrections on its revenue side or an increase in taxes, however, he did call for long-term solutions “so that we stop financing and salvaging always the same loss-making companies.”

Asked to what extent the budget would be affected by the payment of debts worth three billion kuna arising from the government’s collateral to Uljanik and Petrokemija, Marić said that he was definitely not happy with the situation in the two companies and would rather use the money to further reduce the tax burden on taxpayers.

The budget will survive the payment of Uljanik and Petrokemija’s debts without any corrections on its revenue side or higher taxes, the minister said, adding: “But if we now have to deal with problems from the past, I insist that we find a long-term solution so that we can finally stop financing and salvaging always the same loss-making companies.”

The government on Thursday provided state guarantees to the Croatian Postal Bank (HPB) for changing insurance instruments for HPB’s loans to the Uljanik shipyard from 2015 and 2016, whereby the shipbuilding group obtained the funds to pay out wages to its workers, who on Friday ended their ten-day strike over unpaid wages.

According to some media, for the payment to be executed, Uljanik had to withdraw its deposits on the loans (20% of the loans), while the state expanded its 80% guarantees for the loans to the entire loan.

The European Commission is now expected to decide on the shipbuilding group’s restructuring plan. The plan would include a strategic partner, Kermas Energija, as a long-term solution for the group’s shipyards, Uljanik and 3. Maj.

Petrokemija, which needs a financial injection in the amount of 450 million kuna to increase its capital stock. This is expected to be accomplished by issuing an additional 45 million shares to be subscribed for and paid for by the state. The basis for that is a government decision from May on the purchase of 450 million worth of banks’ claims from Petrokemija.

In May this year, the oil company INA said it intended to participate in Petrokemija’s recapitalisation with 150 million kuna, announcing that it would do so with the Prvo Plinarsko Društvo company.

Petrokemija ended the first half of 2018 with a loss of 176 million kuna, which is a significant increase in relation to the loss of 40.3 million kuna, reported in the same period of 2017. “If Petrokemija’s operations are raised to the level of its regional competitors in terms of profitability, and there is no reason why that shouldn’t be so, the state, as a minority stakeholder, will profit from that too,” said Marić.

Marić also said that he expected the tax reform, on which public consultation is under way, to be supported by the coalition partners. He said that the most important move that would reduce the tax burden was a lower VAT rate on fresh meat and fish, fruit and vegetables, and nappies, and that it would reduce the tax burden by close to 1.4 billion kuna.

Two types of contributions will be abolished – contributions for employment and contributions for injuries. Even though health insurance contributions will increase, the overall tax burden on wages will drop from 17.2% to 16.5%, said the minister.

“This will reduce the tax burden on entrepreneurs by 900 million kuna and increase revenues for the health system by 1.35 billion kuna,” said Marić.

Asked about speculation that he would leave the government, Marić said that he did not want to comment on any speculation.


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