FinMin says tax reform deadline short but feasible

Finance Minister Zdravko Maric said on Thursday that although the deadline for the implementation of the tax reform was short, it was feasible, adding that he expected all tax changes to be adopted on time and that most of them would be carried out at the start of 2017.

"The government is sending all these 15 proposed amendments to the tax legislation (...) to parliament," Maric told a news conference after a government session.

He said parliament was the best place for a quality debate and the exchange of arguments in general. "I expect all these laws to be adopted on time and most of them to go into force on 1 January 2017," Maric said.

Some amendments will be implemented at a later date, as they require consent from the European Commission, he added.

Maric said that in the process of drawing up this comprehensive tax reform he insisted on promoting and increasing the efficiency and transparency of the tax system and an equal division of tax reliefs.

According to him the net effect of the tax reform would amount to HRK 2 billion in 2017. Maric reiterated that the tax reform would have great macroeconomic implications and implications on public finances and that it would reduce the taxes to GDP ratio by 0.6% in the first year already.

The overall effect of the tax reform in 2017 and 2018 will amount to HRK 3.3 billion, the minister said.

The tax rate on hospitality services would remain at 13% for those providing half and full board. Bars and a la carte restaurants and hotels would be subject to a 25% rate, he added.

Commenting on amendments announced by Parliament Speaker and Bridge party chief Bozo Petrov, under which state officials would be exempt from the planned changes in the income tax system, Maric said Bridge was entitled to submit amendments and that it was yet to be seen what will happen with these amendments.

The minister underscored that the lowest VAT rate of 5% would continue to apply to bread, milk, medicines, orthopaedic aids and books and that this would not jeopardise the tax reform. Maric said that a 5% would continue to apply to newspapers as well.

Asked if VAT rates would change in 2018, the minister said no, adding that they would remain at 25%,13% and 5%.

Asked if the government would fulfil its promise about lowering the VAT rate to 23% by the end of its term, Maric said: "Anything is possible."

 

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