Croatia raises fuel and tobacco excises to cut budget gap

The Croatian government on Thursday decided to increase excise taxes on gasoline and diesel by HRK 0.20 per litre as well as to raise excise duties on tobacco products in order to increase state budget revenues, with the explanation that this decision arose from Croatia's obligation to curb excessive macroeconomic imbalances, as requested by the European Commission.

Finance Minister Boris Lalovac said that annually higher motor fuel excises would ensure an additional 450 million kuna for the state budget.

This year, this increase will provide an additional HRK 280 million for the budget, with the revenues from the energy excise taxes likely to amount to HRK 7.4 billion for the whole of 2015, according to the Minister Lalovac's explanation.

Higher excise taxes on cigarettes and tobacco products mean that revenues from this source would increase by HRK 150 million on the year, according to the finance ministry's estimates.

Minister Lalovac said that Croatia would have to additionally raise tobacco excise taxes in the coming years in order to reach the average EU level in this sector.

He estimates that higher excise duties would increase the price of a cigarette pack between HRK 0.60 and 0.90.

Additional budgetary adjustments that should amount to 0.4% of Gross Domestic Product, that is to HRK 1.3 billion, as requested by European Commissioner for Economic and Financial Affairs Pierre Moscovici on Tuesday, will be achieved through a "correction of some excise duties" and through a reduction of certain material expenses, Deputy Prime Minister and EU Funds Minister Branko Grcic told the national radio on Wednesday after he and Minister Lalovac returned from Brussels where they held talks with EC experts, including Moscovici, who said that by 21 April Croatia is expected to do some more work, including additional fiscal efforts in the amount of 0.4% of GDP. The talks were a part of consultations with the European Commission within the European Semester, an instrument for coordination of EU member-states' economic policies.

Also today, the cabinet of Prime Minister Zoran Milanovic formally abandoned a plan to monetise the debt of state motorway operators -- Hrvatske Autoceste (HAC) and Autocesta Rijeka-Zagreb (ARZ) -- through concession-giving schemes.

Before the beginning of today's meeting, Transport Minister Sinisa Hajdas Doncic said that the debt must be monetised one way or another or HAC and ARZ would have a gap of some three billion euros in 2016.

He said that the government had given up the idea of a concession model, elaborating that there are models such as concession-granting, securitization, initial public offering and privatisation.

(EUR 1 = HRK 7.6)

(Hina) ms

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