Finance Minister Zdravko Maric said on Wednesday that the government's upcoming tax changes would reduce, over a period of three years, the tax burden on citizens and businesses in the amount of some 6.3 billion kuna (€849 million).
However, given that no tax breaks can increase net income for people with below-average wages, he said he is in favour of expanding the scope of retail products to be taxed at a lower VAT rate of 13 percent.
While arriving for a session of the inner cabinet on Wednesday, Maric was asked by reporters to comment on the fact that under the tax reform to be discussed by Parliament, the already highest salaries would increase the most.
“The planned tax changes will reduce the tax burden on all citizens and businesses by around 6.3 billion kuna (€849 million) over a three-year period. I hope that these items will be put on the parliament’s agenda today. It is not true that we have not taken into account proposals regarding the tax reform. One in three proposals have been accepted and included into the bill’s amendments,” Maric told reporters.
The parliament is expected to put on its agenda today the government’s latest tax reform proposal, which is a set of amendments to nine tax-related laws.
Among them are amendments expand the lower 13 percent VAT rate to include, as of 2019, diapers, live animals, meat, fish and crabs, shellfish, vegetables, fruits and nuts, and eggs, as well as the cutting of the standard, 25 percent VAT rate to 24 percent, as of 2020.
The tax reform set also includes changes to the taxation of real estate, financial transactions, company profit and income taxes, and general tax rates. This is the third round of tax breaks in a tax reform launched in 2017.
Asked to comment on the fact that some salaries will go up by as little as 20-80 kuna (€3-11) while others will go up by 1,000 kuna (€135), Maric said that calculations about how much salaries would grow were not entirely correct because the tax law does not define one’s net salary, but rather how much their gross salary is taxed, and that the question that should be asked is how many people actually have to pay taxes.
“If you are not subject to income tax – because you earn a below-average salary, or have more dependents – there is no tax break that can directly increase your net income. But that is why this third round of tax changes puts emphasis on helping solve that problem. Food accounts for the largest portion of costs of living for people with below-average salaries, and that is why we are reducing VAT on some foods,” said Maric.
(€1 = 7.42 kuna)
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