ZAGREB, May 21 (Hina) - Deputies at the Croatian National Sabor's House of Representatives will in the next two weeks discuss draft changes to the tax system, which have been suggested by the Government and which have already prompted
numerous reactions, most of them coming from the unions. According to the drafts which the Government forwarded to the Sabor last week, excise taxes would be increased for a series of products, whereas contributions assessed on salaries would be reduced.The VAT rate would remain unchanged despite expectations that it would be reduced. Defending their drafts at the Sabor, government representatives will say they were aimed at stimulating the development process, increasing employment and reducing illiquidity. This set of legal regulations also includes draft changes to the Law on Profit and Income Tax. Retained profit would be exempt from profit taxation
ZAGREB, May 21 (Hina) - Deputies at the Croatian National Sabor's
House of Representatives will in the next two weeks discuss draft
changes to the tax system, which have been suggested by the
Government and which have already prompted numerous reactions,
most of them coming from the unions.
According to the drafts which the Government forwarded to the Sabor
last week, excise taxes would be increased for a series of products,
whereas contributions assessed on salaries would be reduced.
The VAT rate would remain unchanged despite expectations that it
would be reduced.
Defending their drafts at the Sabor, government representatives
will say they were aimed at stimulating the development process,
increasing employment and reducing illiquidity.
This set of legal regulations also includes draft changes to the Law
on Profit and Income Tax. Retained profit would be exempt from
profit taxation, and the tax base would be reduced for each newly-
employed person, a measure aimed at stimulating employment.
These measures are aimed at alleviating the situation in economy,
decreasing labour costs and enabling companies to invest and create
new jobs, Deputy Prime Minister Slavko Linic and Finance Minister
Mato Crkvenac said after the drafts were confirmed by the
Government.
It was estimated that those objectives would be achieved best by
reducing contributions assessed on wages for health and pension
insurance by two percent. This would mean a decrease of health
insurance contributions on wages from nine to seven percent
(whereas contributions from wages would remain at the current level
of 9 percent). Pension insurance contributions would be reduced
from 21.50 to 19.50 percent because the rate on salaries would
decrease from 10.75 to 8.75 percent, whereas the rate of
contributions from salaries would remain 10.75 percent.
Government estimates that reducing these rates would mean 1.2
billion kuna (about US$ 141 million) of income less for health
insurance, whereas pension insurance would have a 'loss' of some
2.2 billion kuna (about US$259 million). However, this would be
compensated for by direct transfers from the budget. The Government
also believes the collection of contributions will improve once
they are reduced.
Another measure for improving liquidity is a draft on extending the
deadline for the payment of the most important source of the
budgetary revenue, VAT, from the tenth day of the month to the end of
the month. According to the Finance Minister, this would make more
than one billion kuna (about US$117 million) available for economy
per year.
On the other hand, budgetary revenues would be reduced by some 800
million kuna annually, and if the Sabor adopts the government
measures, whose application would start on June 1, the budget would
lose some 467 million kuna (about US$55 million) by the end of the
year.
According to the Government, this loss would be made up for by
increasing excise taxes which would bring about 1.5 billion kuna
(about US$176 million) by the end of the year. Two thirds of that
amount would be secured this year by increasing excise taxes on oil
alone.
The price of lead-free petrol would increase by 29 percent to 6.48
kuna per litre, whereas the price of diesel would rise by 13.7
percent to 5.07 kuna per litre.
Draft excise taxes on coffee, beer, alcohol and tobacco would
increase the prices of those products by 5-10 percent, Crkvenac
said, adding there should be no changes in the price of some of those
products.
New excise taxes on cars, which would be assessed on the value and
not power of cars, would even reduce the prices of cars of lower
class. The Government has proposed that special taxes not be levied
on cars whose value does not exceed 60,000 kuna (about US$7,000).
The unions believe that more expensive petrol will increase the
prices of a series of other products and make the already low living
standards worse. Finance Minister Crkvenac claims increasing
excise taxes and the price of petrol should not have an inflationary
effect on prices but rather stabilise them.
According to Crkvenac, this could increase the costs of living by
1.7 percent. A decrease in the sale of some products can be expected
as well, and the Government has therefore calculated a ten-percent
fall in sales into the explanation of its measure on increasing
excise taxes on cigarettes.
(hina) jn rml