Prime Minister Andrej Plenkovic on Wednesday unveiled an economic rescue package to save jobs and help the economy in the fallout of the epidemic. These include increasing the net minimum wage to 4,000 kuna (€530) and some tax exemptions for businesses over the next several months.

“We have no doubt whatsoever that this is the most severe crisis since the (1991-1995) Homeland War, and I believe that we will, after a while, remember March 2020 as the most difficult month we have lived through in this millennium,” Plenkovic told reporters on Wednesday.

He repeated that “we are at war with the coronavirus, with panic and with the socioeconomic impact of the pandemic on jobs, companies and the economy as a whole.” He said the situation was grave, adding that the biggest problem was uncertainty, because no one could estimate how long the situation would last.

Plenkovic announced that the government would increase the minimum net wage from 3,250 (€430) to 4,000 kuna (€530) in March, April, and May, as part of the existing scheme used by 65,000 companies for 400,000 workers in which the government will pay minimum pays out minimum salaries to furloughed workers.

Also, the state will pay itself the benefits contributions, which amounts to another 1,460 (€192) for every minimum salary. In total, the state will pay 5,460 kuna gross (€720) per every furloughed employee.

Over three months, the scheme is expected to cost 8.5 billion kuna (€1.12 billion), Plenkovic said, adding that businesses are only eligible to apply for the subsidy if they keep their employees on the books.

Companies whose business operations have been prevented or seriously hampered by the epidemic will be partially or entirely exempt from paying profit tax, income tax, and salary contributuions for employees in April, May, and June.

The companies that have seen their revenues drop by 20-50 percent will be allowed to postpone tax payments, and later pay their dues in interest-free instalments over 24 months. Companies whose revenues have decreased by less than 20 percent are “stable enough to weather the crisis,” Plenkovic said.

“However, businesses which generate a turnover of less than 7.5 million kuna (€1 million) – which is 93 percent of all companies in Croatia – and whose revenue has dropped by more than 50 percent, will be completely exempt from their tax liabilities, profit tax, income tax, and contributions,” Plenkovic said.

Companies which posted more than 7.5 million kuna in revenue, or 7 percent of all registered companies, will be exempt from paying their tax liabilities in proportion to the decrease in revenue over April, May, and June.

The tax return deadline for 2019 has also been extended to June 30.

In farming, the government intends to help farmers by favouring local producers in public procurement, to achieve the target of having at least 60 percent of agricultural and food products procured made in Croatia. Another form of aid will be the emergency purchase of surplus produce from small dairies.

Plenkovic announced talks with the social partners, notably the trade unions, to see how the government – the country’s single largest employer – could cut spending. He said that there was enough money in the budget to pay for wages and pensions for March, which will be paid out in April.

“We have yet to discuss wages and pensions for April, which are paid in May, and how to respond to these challenges,” Plenkovic said. He said that sources of financing were being sought in coordination with the central bank.

The government had adopted its first rescue package earlier this month. The package, worth 30 billion kuna (€4 billion), included tax relief and subsidised minimum wage to furloughed workers.

Finance Minister Zdravko Maric said on Tuesday that 52,000 businesses had applied for tax deferral to date, while the Labour Ministry told state agency Hina that more than 65,000 companies had applied for the state-subsidised minimum wage scheme, covering about 400,000 employees.

In January this year, Croatia had a total of 1.52 million employed people, out of a population of about 4 million.

Business associations have called the first set of government measures insufficient, and called for a write-off – rather than postponement – of taxes and salary contributions, and for exemptions from dozens of fees and para-fiscal levies.

(€1 = 7.61 kuna)

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