Prime Minister Plenkovic: Tax reform aimed at boosting growth and employment

Prime Minister Andrej Plenkovic said on Thursday that the implementation of the tax reform was one of the key aspects of the government's reform efforts and the first, crucial measure aimed at improving the overall economic situation in the country.

The tax reform covers a large package of 15 laws, Plenkovic said at the start of a government meeting, adding that the laws would introduce novelties to income tax, profit tax, value added tax and property transactions tax, as well as to contributions, local taxes, excise taxes, a special tax on motor vehicles, fiscalisation of cash transactions, tax counselling and stamp duties.

The main goals of this comprehensive tax reform are economic growth and employment, strengthening the competitiveness of the national economy, ensuring social equity, encouraging demographic renewal, keeping highly-educated people in Croatia, and stimulating small and medium enterprises and farmers, the prime minister said.

He added that the purpose of the reform was also to ease the burden on businesses and households by reducing tax rates, maintain the sustainability of public finances and the functioning of local government, and reduce general government deficit to 2% of GDP next year as the main macroeconomic goal.

Under the proposal, the most important change would be a reduction of the general tax rate from the present 20% to 18%, and for small and medium enterprises and farmers to 12%.

Plenkovic said that "no one will lose" as a result of the proposed changes to income tax and that they would ease the tax burden on 1.8 million people.

"For citizens who are not subject to income tax and for whom, for that reason, we cannot increase disposable income, we have proposed corrections to the VAT system by redefining the lowered rates for electricity supply and waste disposal," the PM said.

He specified that the lowest VAT rate of 5% would continue to apply to bread, milk, medicines, orthopaedic aids and books.

Plenkovic noted that the agreement on the tax reform had been reached in consultations with the social partners, relevant ministries and coalition partners, highlighting its social aspects. He added that the general VAT rate of 25% and the existing lowest VAT rate of 5% would remain in place "at this stage".

The government adopted the tax reform plan and sent the proposed amendments and bills to parliament for adoption.

 

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