Finance Minister Lalovac says gov't planning lower VAT rate on food products

The products to which the new VAT rate would apply are fresh fish, cabbage, chard, potato, strawberries, mandarins, apples, eggs and honey.

 

"We are aware that the VAT rate on imports of those products will be lower as well, but the rate will nonetheless boost domestic production," Lalovac told reporters after a government session.

 

 He added that the VAT rate on meat would not be lowered as it would deal too big a blow to VAT revenues.

 

 Lalovac said that calculations for the new VAT rate would be presented very soon.

 

Reporters also wanted Lalovac to comment on some banks having announced that they would file complaints of unconstitutionality over the enforcement of legislation on the conversion of loans indexed in Swiss francs into euro loans, as well as on the latest situation with treasury notes, which signals first problems with the financing of the state.

 

"There are no problems with the financing of the state," Lalovac said, adding that it would be interesting to see how the Constitutional Court would rule on the banks' complaints. "It would set a precedent if it rules against the parliament's unanimous decision... it would mean that members of Parliament do not know the Constitution."

 

Lalovac said that he would attend a session of the Economic and Financial Affairs Council on Monday and that he expected a heated debate on the conversion of CHF loans into euro loans. The government's position is very clear: "We are defending citizens, there were no francs in Croatia, banks have sought and are repaying loans in euros and consumer protection comes first."

 

The minister said that the banks had had the opportunity on several occasions to define social criteria, had been enabled to do so with a law on profit tax but did not do it because they were not interested in social criteria.

 

"They did not want to because they wanted to make a deal - and that is known today - with the current Opposition. It was the same in 2011," Lalovac said.

 

Lalovac said he had information that the banks would exert pressure on the kuna exchange rate. "I must admit that I don't understand the speculation, particularly if we know that British American Tobacco has recently paid a large amount of money for the TDR tobacco factory and that there is a sufficient amount of euros in the country. The question arises why they are attacking the exchange rate that way," he said, adding that the Finance Ministry, too, was solvent.

 

Asked if he had any countermeasures for the banks, Lalovac said that he did.

 

Talks will be held with the Tax Authority in the coming days on taxes on credit assets and other measures from within the ministry's remit will be considered, he said.

 

"We want to cooperate with the banks in the long run and they have to say if they want to cooperate with the Croatian state and people in the long run," said the minister.

 

Asked to comment on the economic platform of the coalition of political parties led by the opposition Croatian Democratic Union (HDZ), Lalovac said that it contained a lot of promises and that the HDZ had promised a lot so far and done nothing.

 

"The platform should be given to an institute for analysis on how it would affect the deficit. We are trying to realistically view the situation, both as regards the lower VAT rate and other things. They had promised to deal with CHF loans, but didn't. They had promised to build bridges, tunnels under the Adriatic," he said, adding that it would no longer be possible to finance infrastructure projects from the state budget.

 

He added that everyone wanted greater economic growth, stressing that foundations for that had been laid by his government. "We need a more responsible discourse about public money because our public debt is very high and when it continues its term in office, the current government will seriously tackle the management of public debt. That will be the fundamental issue and we are prepared to show that we are reducing the deficit."

 

In that context, he said that favourable indicators about VAT revenues from tourism would be presented by Deputy PM Branko Grcic on Friday.

 

"These are small steps that are based on organic growth, on what Croatia can currently achieve in real circumstances. We need basic, real growth rather than the blown-up growth we had in 2004 and 2005," said the minister.

 

The entire borrowing by the current government is due to debts from that period, he said. "All those debts, which are claimed to have been incurred by the present government, are actually debts that were never recorded - the debt of the HBOR, roads, highways, HZ Putnicki Prijevoz, HZ Cargo - those debts were incurred then and they have been entered in accounting records now. That is the truth," Lalovac said, reiterating that growth based on public money and public debt was no longer possible. 

(Text: Hina)