Finance Minister Zdravko Maric said on Thursday that he did not want to speculate about the reduction of Value Added Tax rates on electricity and gas, adding that a set of measures to mitigate price hikes would be made public before 1 April.

Asked by the press about a possible cut in VAT on gas and power to a lower, 5% rate, Maric declined to speculate on such possibility, reassuring the general public that the government would also respond very soon to rising fuel prices.

Maric recalled that Prime Minister Andrej Plenkovic on Wednesday informed the national parliament about possible measures to address the consequences of rising energy prices for the enterprise sector and households.

Three-layered set of measures

The set of those measures will be based on three segments: an upgrade of the existing model of vouchers for the socially most vulnerable categories of the population, a possible contribution of the HEP power company and other companies to efforts to alleviate price increases, and changes in the taxation policy, said Maric.

He, however, stopped short of defining which VAT rates could be applied.

The minister recalled that the VAT rate on electricity supply had been lowered from the standard 25% rate to 13% on 1 January 2017, but that gas supply was not included in that decision because the gas supply network did not cover the entire country.

Maric said that now, however, there was room for the correction of VAT rates on gas supply.

He said that the current gas prices would remain in force until 1 April, when the heating season ends. Therefore 1 April is taken as the deadline for the launch of the set of measures to deal with the price increases.

Maric said that the government’s agenda also envisaged a reduction of VAT on all foods until the end of the cabinet’s term.

Croatian Central Bank (HNB) governor Boris Vujcic told the news conference that the inflation trends in 2022 would be mostly influenced by the prices of energy products.

On Monday, the HNB stated that the average annual inflation rate this year could rise to 3.5-4%, basing its projection on higher-than-forecast inflation rates in November and December 2021 and the assumption that gas and electricity prices will rise considerably as of 1 April.

The latest forecasts indicate that the average annual inflation growth this year could be 3.5-4%, assuming that gas prices go up by 10-30% and electricity prices by 5-15%, and it is still expected that the annual inflation rate will gradually decrease towards the end of the year, the HNB said.

A higher-than-forecast inflation projection for this year is a result of higher-than-forecast results in November and December and the assumption of a somewhat stronger increase in gas and electricity prices as of 1 April, the HNB added.