Finance Minister Zdravko Maric said on Wednesday that the planned pay rise for state administration and public sector employees would cost between HRK 1.1 billion and 1.2 billion annually.

Maric said that the planned increases were expected to take effect at the beginning, in the middle and in the second half of next year, adding that during the term of this government the base pay increase for state administration and public sector employees would be around 18.3 percent.

In an annual report on his government’s work submitted to Parliament on Wednesday, Plenkovic said that the government would offer a 6.12% wage increase to all state administration and public sector employees in three 2% rounds, which was why the planned reduction of the standard 25% VAT rate by one percentage point, set for January 1, would be postponed.

Maric said that the government would also tackle the issue of the job complexity index and bonuses defined by different contracts, adding that a detailed analysis of civil service jobs would be carried out.

Speaking of the plan to increase non-taxable income from HRK 3,800 to 4,000, the minister said this would increase the number of taxpayers not subject to income tax by 75-80,000. He noted that 1.7 million citizens were currently not subject to income tax.

Maric said that about one million other employees would also be subject to higher non-taxable income and that the financial effect would depend on their wages.

The total effect of this measure is HRK 500 million, which should end up in citizens’ pockets, while local government will be left without this money. Maric announced compensation measures for local government units. The delay in reducing the VAT rate by one percentage point will leave between HRK 1.7 billion and 1.8 billion in government coffers, the minister said.

Maric said that despite the planned measures there would be no departure from the set economic and fiscal policy guidelines, adding that the 2020 budget would be balanced in that regard.

(€1 = HRK 7.4)