Opposition parties in parliament on Tuesday presented their objections to the proposed fourth round of the tax reform, claiming that the reform is discriminatory and will not bring any tax reliefs, while the ruling majority praised the reform, saying that citizens could expect an additional HRK 2.3 billion in reliefs.
The reform in 2020 will help collect an additional HRK 5.5 billion of taxpayers’ money, and that is no tax relief, MP Gordan Maras (SDP) said.
MP Nikola Grmoja of the Bridge party, too, believes that tax pressure is on the rise rather than on the decline.
MP Branko Grcic (SDP) said that the growth of the tax burden was indicated by Eurostat data which showed that taxes in 2018 were higher than in 2017 in Croatia, Poland, Romania and Luxembourg.
“Everyone can have a look and see how much they paid in taxes in 2016 and now. How much income tax, VAT and profit tax they paid,” said Finance Minister Zdravko Maric, who defended the reform in parliament, trying to convince MPs that the reform would bring tax reliefs both to citizens and entrepreneurs.
Petrov: Not fair that people with high earnings enjoy tax reliefs for children while others don’t
Maric underscored that the effects of tax reliefs have a positive effect on the economy, investments, consumption and employment and ultimately on the budget itself.
Bridge party leader Bozo Petrov believes that it is not fair that people who have high earnings are eligible for tax reliefs for children yet those who are trying to make ends meet do not have that privilege, which means that people with high salaries earn even more while those on the brink of poverty do not. The system has to be fairer and each family with children should be eligible for a fixed amount of two to three thousand kuna, he said.
Croatian Democratic Union (HDZ) whip Branko Bacic welcomed the reforms, particularly the part which exempts young people from paying income tax. That is a great demographic measure, he said. “A young person who gets a job when they are 20 will be exempted from paying a total of HRK 60,000 over a period of 10 years,” he underlined.
MP Robert Podolnjak (Bridge), however, considers this to be discriminatory against young people who study, wondering how much they would feel that relief.
Maric admitted that the measure was not ideal but that its demographic nature was evident.
He denied that it was discriminatory and in fact could stimulate students to finish their studies earlier and enter the labour market sooner.
The proposed set of nine laws that are part of the fourth round of the tax reform introduces a lower VAT rate of 13% on food preparation in and outside catering facilities, exempts young people up to the age of 25 from income tax, and reduces income tax by 50% for those aged between 26 and 30.
The reform also introduces a profit tax of 12% for all enterprises that generate an annual revenue of less than HRK 7.5 million instead of the current HRK 3 million threshold as well as introducing a tax on non-alcoholic beverages based on their sugar level and an additional tax on energy drinks.
The total amount of tax reliefs in the fourth round of the tax reform amounts to HRK 2.3 billion and all four rounds amount to close to HRK 9 billion, Maric explained.
The new tax law enters into force on 1 January 2020.
