As Novac/Frenki Lausic writes on the 8th of February, 2020, at the same time as talks on the increase in excise duties on non-alcoholic beverages and cigarettes are going on, the Ministry of Finance is also negotiating with companies in the alcoholic beverage industry. According to unofficial information, the tax administration’s working proposal is to increase these excise duties by about 30 percent, starting in early May, which will see alcohol prices in Croatia rise.
Novac’s sources didn’t want to talk in more detail about the proposal put before them by the aforementioned ministry, but that they would see prices in Croatia rise, making a litre bottle of Pelinkovac for example increase from 100 kuna to 104 kuna.
When asked if more specific information about how much excise duties would increase depending on the alcohol content – because there are different excise duties for different alcoholic beverages, meaning the excise duty or calculation on alcoholic beverages over 1.2 percent is not the same for drinks with alcohol content of over 22 percent – the response was that only information that the initial proposal of the Ministry of Finance and the Tax Administration was available. That information foresees, as stated, an average increase in excise duties of about 30 percent.
The Croatian Employers Association (HUP and the Croatian Chamber of Commerce (HGK) have declined to comment on this topic so far and have claimed that there is no official proposal from the Ministry of Finance.
However, Novac’s sources in the beverage industry have pointed out that several working group meetings have been held, and at these meetings, the Ministry of Finance has proposed an increase in excise duty of about 30 percent. It is somewhat understandable why HUP, HGK, but also the alcoholic beverage producers don’t want to come forward with more detailed information on the current proposals, because there is an agreement not to release the information to the public before a final decision is reached.
However, some of Novac’s interlocutors are from the beverage industry, and the situation was similar with the working group for increasing excise duties on non-alcoholic beverages. They believe that the Ministry of Finance wants to raise excise duties as much as possible with as little media attention and public noise as possible. So, just after Jutarnji list announced that excise duties on sugar in soft drinks will be increased by an average of 100 percent, and for Red Bull by as much as 1450 percent, the Ministry of Finance softened its first proposal for alcohol prices in Croatia to rise, Novac was unofficially informed.
The Ministry of Finance had suggested that the linear taxation of 30 kuna per hectolitre should still be maintained, although industry representatives had had it announced to them that they would abolish this provision (so far this had amounted to 40 kuna per hectolitre) and that strong taxation should be introduced based on the taurine and methyl-xanthine content.
The beverage producers then demanded that linear taxation per hectolitre be abolished and that the content of additional sugar, taurine and methyl-xanthine be taxed at a rate of 10 percent for those beverages that have those amounts below five grams per 100 millilitres, at a rate of 20 percent at a share of five to eight grams, and at a rate of 50 percent to a share of over eight grams.
In further talks, the Ministry agreed to reduce linear taxation to 20 kuna per hectolitre, which means that, for example, excise duties on a bottle of Coca-Cola would rise by 100 percent instead of 120 percent. These negotiations are still under way, so further adjustments are possible, but the excise duty on tobacco will still, as things stand, become more expensive, so a box of cigarettes will be two kuna more expensive.
Industries who supply non-alcoholic beverages, alcoholic beverages and tobacco are aware that there will be an increase in excise duties, but much milder, especially for non-alcoholic beverages and alcoholic beverages. All of them point out that the increase in excise duties will shift to consumers.
Yesterday, the taxpayers’ association Lipa (Udruga Lipa) responded in a statement against the increase in excise duties on soft drinks and tobacco, saying they oppose a re-increase in the tax burden, which they say is the sole aim of patching up the budget deficit caused by the non-implementation of reforms and Croatia’s signature non-transparency.
They note that they believe that the Croatian Government will increase the overall tax burden with these regulations, but that the money raised is not intended to be spent on improving the health sector, but that it “serves to patch up the budget deficit.”
“Although the Ministry will refer to an EU Directive, it should be noted that the EU continually recommends that Croatia implement reforms in all parts of the public sector, and these recommendations are largely ignored,” Udruga Lipa said in a clarification of their position.