Finance Minister Zdravko Maric on Thursday presented in the parliament four bills from the fifth round of tax reform, saying that the proposed taxation policy served to encourage a positive business climate, investments and wage growth as well as improve citizens' living standards.

The government has proposed lowering income tax rates from 24% to 20% and from 36% to 30%, with Maric saying that at the moment 1.8 million of 2.8 million workers who are subject to income taxation did not pay that tax due to the amount of their income.

“The total effect (of tax lowering) will be two billion kuna, however, it will not be to the detriment of local government units but the state budget,” he said.

Maric said that the tax reform increased the amount of nontaxable allowances from HRK 2,500 to HRK 13,000 a year, noting that employers would be able to pay the latter amount to their employees without having to pay taxes.

Maric noted that the Fiscal Equalisation Fund would stay and that its funds would go to less developed municipalities and counties.

As for profit tax, Maric said that the standard rate for all those who have an annual income of up to HRK 7.5 million would be reduced from 12% to 10%, noting that 90% of entities subject to profit taxation belonged to that category and describing the lowering of the tax rate as an incentive to businesses and employers to invest and hire.