Gov't to discuss budget revision, income tax, VAT...

Deputy Prime Minister Branko Grcic said on Wednesday that the expenditures side of the budget would undergo some changes but that welfare benefits, pensions, and veterans' entitlements would not be touched. As for the revenues side of the budget, the government estimates that GDP will drop 0.5% this year.

Grcic said that savings would be made on material costs, subsidies and some capital projects.

"These are all more or less acceptable, not so important financial changes. What is the problem on the revenue side is the negative BDP rate this year," said Grcic.

The government has projected the GDP rate at -0.5%, which is why the revenue side had to be corrected and why the deficit would be higher than planned, he said.

In this year's first revised budget, adopted by parliament in March, the government downgraded its previous estimate of GDP growth for this year from 1.3% to 0.2%.

According to unofficial information, the planned budget revision is expected to reduce budgetary revenues by around two billion kuna, to some 114.5 billion, while spending would be cut by 500 million to some 130 billion kuna.

The budget deficit would thus amount to 15.5 billion kuna, around two billion less than envisaged by the March budget revision.

Grcic said today that the revised budget would bring a deficit of 15-16 billion, or 4.8% of GDP at central government level.

The government is also expected to discuss several bills related to the budget revision. It is expected to forward to parliament for consideration changes to the Income Tax Act whereby the nontaxable income would be increased from 2,200 to 2,600 kuna, and in case of pensioners from 3,400 to 3,800 kuna. It was also announced that the threshold for the highest, 40% income tax rate would be raised from the current threshold of HRK 8,800 to 13,200.

The government believes that raising the nontaxable income would make room for raising the salaries of more than one million workers.

The government ministers will also discuss a proposal to introduce a 12% tax on income from interest on savings deposits on 1 January 2015.

Under a government bill of changes to the Profit Tax Act, tax benefits would be introduced for reinvested profit, investment in long-term assets and for employers who keep their workers or increase their number.

The government will also discuss changes to the VAT Act whereby small business owners would not longer have to pay VAT upon issuing an invoice but upon charging it and whereby the amount of annual revenues subject to VAT payment upon collection of claims would be raised from two to three million kuna. This would increase the number of such taxpayers from 50,000 to 120,000.

The government will also discuss changes to the Games of Chance Act to tax all betting winnings and not only those exceeding HRK 750 as is now the case. The government is also expected to make a decision on the continuation of the sale of shares of the Institute of Immunology by publicly soliciting bids.