VAT TO REMAIN 22 PER CENT, SALARY CONTRIBUTIONS DECREASE 2 PER CENT

ZAGREB, May 18 (Hina) - Value Added Tax of 22 per cent will not change, and the Government will motion through law amendments an extention to the payment of the VAT from the tenth to the end of the month. At Thursday's closed session the Government adopted motions for changes to excise taxes for oil products. The price of motor gas would thus rise by 29 per cent, diesel by 13.7 per cent, while the price of heating oil would not change. Excise tax would also increase for cigarettes, alcohol, coffee, beer and cars. On the other hand, contributions on salaries (not from salaries) would be reduced by two per cent for health and pension insurance, which would lead to the lowering of the price of labour, Vice- Premier Slavko Linic and Finance Minister Mato Crkvenac said after the session. The Government will send into parliamentary procedure 11 bills from the field of tax policy, and a packet concerning the auditing of the ownership transformation and privatisation process. Crkvenac explained that a reduction of the VAT at this moment would not be good, while Linic stressed that it would mean a decrease of consumer tax, not in economic activities. Crkvenac held the extension in the deadline for the payment of the VAT was important because this meant billions of kuna for companies in cash flow. An increase in excise taxes would add 2.5 billion kuna to the budget (US$312.5 million) on an annual basis, and 1.5 billion (US$187.5 million) are planned for this year. Crkvenac explained that the increase in excise tax for cigarettes, alcohol and coffee would cause an increase in their prices by up to ten per cent, while the price of beer should not change. Calculations show that an increase in excise tax could cause an increase in prices influencing life expenses by about 1.7 per cent. However, Crkvenac stressed, there was no reason for an increase in the prices of other products, and announced that all available powers of the legal state would be used to influence those who would like to use this for an unjustified rise in prices. Companies and certain products are in great measure burdened by the price of labour instead of energy, Crkvenac said. He stressed that independent on the increase of the prices of oil products, their prices would remain the lowest in relation to neighbouring countries. Crkvenac and Linic stressed that at the moment it was most important to stimulate the development process, decrease illiquidity and increase employment. A priority is to decrease the price of labour and open new job opportunities, they stressed. This should be significantly facilitated by a decrease in contributions on salaries by two per cent, so the tariff for health insurance would be decreased from nine to seven per cent, and the pension insurance from 10.75 to 8.75 per cent. This, Crkvenac said, would be of multiple use -- companies would thus be left with more funds for investing into development, employment, and the companies' power would increase. Crkvenac calculated that for an average salary of about 3,300 kuna (US$412.5) the reduction of contributions would mean 200 kuna (US$25) more for the company. The packet of tax laws includes amendments to salary tax and profit tax, with which all kept profits would be relieved from this tax, while the basic taxable amount would be decreased for every newly employed person. The government also sent to parliamentary procedure a bill on the auditing of the ownership transformation and privatisation process. The audit would be done by a special state audit department, so amendments to the laws on state auditing, privatisation and register of companies have also been sent into the parliament for discussion. (hina) lml mm