The American Chamber of Commerce in Croatia (AmCham) presented on Tuesday to Finance Minister Zdravko Maric proposals for further tax breaks, including income tax cuts, with Maric saying the proposals were in line with the tax reform so far and that further tax changes should be "pondered and analysed."

“The recommendations are very structured, and they are largely or completely in line with what the government has done so far in the different rounds of its tax reform,” Maric said at a business lunch organised by AmCham to discuss the tax policy in challenging times.

“I think we agree on many things, but this is a matter of dynamics and fiscal possibilities, as well as the challenges that we are faced with and that await us… All of that should be taken into account and decisions should continue to be made depending on those elements. Economic growth, primarily employment and living standards, should be further boosted through tax, non-tax and administrative breaks,” Maric said.

However, further changes, notably the ones like AmCham’s proposals, “need some additional consideration and analysis”, Marić said, recalling the announced income tax change referring to the raising of the tax relief limit for dependants from HRK 15,000 to 24,000, to apply to the whole of 2022.

AmCham executive director: We hope for new tax relief opportunities

AmCham executive director Andrea Doko-Jelusic said she hoped that even though the government would have a lot of work to do regarding euro introduction, there would be an opportunity for a new round of tax breaks.

AmCham’s recommendations put emphasis on increasing the nontaxable personal deduction to HRK 4,900, lowering the income tax rate from 20 to 15% and from 30% to 25%, a well as applying the highest monthly and annual base when calculating health insurance contributions.

AmCham also proposes changing the Income Tax Act to define that in addition to the awarding or purchase of own shares, the awarding of or acquisition of shares in a limited liability company should also be treated as capital income, which, it says, would help in the development of small and medium-sized companies as well as startups in Croatia.

Petra Megla of KPMG Croatia said the Croatian economy was faced with a labour shortage, hence it was necessary to additionally reduce the tax burden on labour to increase the effective net wage by at least 11-13%.

As for the proposed restriction on health insurance contributions, Megla said that it was a moderate and balanced proposal that would be acceptable for the state budget while reducing the tax burden on employers.

Unlike pension insurance, for which the contribution rate is calculated up to the highest monthly, that is, annual base, in the amount of six average gross monthly/annual salaries, under AmCham’s recommendations, the said limit does not exist for health insurance contributions.

This particularly affects employers of highly qualified workers, considering that they have an ‘unlimited’ 16.5% health insurance contribution obligation, according to the full amount of the salary and other income from dependent work, which significantly increases the cost of work for these workers, AmCham said.

Answering reporters’ questions about inflation, and asked if considering the already announced fuel vouchers, the government was also considering food vouchers, Maric said that the idea behind vouchers was to ease the pressure of inflation on the most vulnerable groups.

“Such measures are not simple to devise or implement, and we need more time for that, so I would not make any definitive statements at the moment regarding either fuel or food vouchers. We are working on it,” the minister said.

Asked if Croatia was threatened by fuel shortages, considering news that some smaller distributors have started closing down and that some INA petrol stations are out of diesel, Marić said that he did not have such information and that he would discuss the matter with Economy Minister Davor Filipovic.

He said that similar information appeared recently about shortages at INA stations, but that Filipovic checked it and was told that the information was not correct.