Changes to income tax rules chance to raise salaries, says FinMin

Photo /Vijesti/2019/09 rujan/01 rujna/HN20190901255484.jpg

Finance Minister Zdravko Maric said on Sunday the changes to income tax rules entering into force today would give employers an additional possibility to raise their employees' salaries.

"All the changes are in line with what we have been announcing," he told reporters.

He said the pay rises would eventually mean higher living standards and that this was in line with the changes made in the previous three tax reform rounds, notably the last one from the end of 2018, when the non-taxable amount for bonuses was raised from HRK 2,500 to 7,500.

The minister said this was not coercion but just an option for employers, adding that this was a contribution by public finances and the fiscal policy to raising salaries in the business sector.

The latest non-taxable earnings refer to meals, accommodation, daycare, holidays, and per diems. Maric said that as of January 1, health insurance contributions would also be non-taxable.

Asked if he was confident that employers would utilise these tax breaks, the minister said he believed that a large number had a very positive view of this option as they could raise their employees' salaries without being subject to any additional tax burden.

He said payments for non-taxable bonuses, which went into force last December 1, reached HRK 1.25 billion that month alone, covering 471,000 employees. He added that this option was in force this year as well and that HRK 850 million had been paid until now.

Asked if the state would utilise these options, Maric said the current focus regarding public sector workers was on the base pay. He added that for now the government was paying them HRK 2,500 in non-taxable holiday and Christmas bonuses.

Asked about a strike announced by medical staff, he said negotiations were under way with unions "and we'll see where and in what way this will all go."

The government believes that employees deserve higher incomes, he said. "Just as it was the case in the private sector, we can't ignore the fact that the options are limited," he said, adding that one must consider the state budget and public finances and "balance" accordingly.

Text: Hina

News | Maric Zdravko