Prime Minister Andrej Plenkovic on Thursday unveiled the government's package of measures designed to help households and businesses amid the cost-of-living crisis, state news agency Hina said.

The government estimated that the value of the package is nearly 21 billion kuna (€2.8bn). It includes price caps for some foodstuffs and various subsidies and aid for households and businesses.

In a government session Plenkovic said that the program was aimed at “those hardest hit by increased prices and those most in need.”

“We are redistributing what we have in a fair way,” he added.

Mitigating rising energy prices

Under the new rules, fom 1 October 2022 to 31 March 2023 households will pay €59 per megawatt-hour for consumption of up to 2,500 kilowatt-hours of electricity and €88 on average for consumption above that threshold.

All consumers of electricity in Croatia fall into either household or business category, with only the former ones paying government-controlled prices. Since this means any public entity would have to deal with skyrocketing bills, the government now created a third category, with the price set slightly above the household rate.

These will include kindergartens, schools, universities, retirement homes, non-governmental organizations, religious communities, municipalities and towns. They will be subject to a universal tariff of €62/MWh.

Businesses that consume less than 250,000 kWh over the next six months will pay 0.52 kuna (€0.07) per kWh, and those that use more will pay €1.76. Large consumers that use more than 2.5 gigawatts will be subject to a tariff of €250/MWh. Natural gas prices for households will be capped until 31 March 2023.

As regards heating energy, the unit price for 160,000 households and businesses with central and closed heating systems will remain unchanged.

The government also prepared a 1.1 million kuna (€147,000) aid package for those using wood for heating, and Plenkovic also announced that the price of gas in portable cylinders would be capped next week.

Fiscal policy

The amount of non-taxable salary bonuses has been increased from 3,000 kuna (€400) to 5,000 kuna (€667) per year, and non-taxable rewards for work performance are increased from 5,000 kuna to 7,500 kuna (€1,000). Non-taxable lump-sum amounts to cover workers’ food expenses are increased from 5,000 to 6,000 kuna (€800) annually, and non-taxable pension severance pay is increased from 8,000 (€1,066) to 10,000 kuna (€1,330).

Some 130,000 parents who receive child benefits will receive a one-off payment of 300 kuna (€40) for one child, 500 kuna (€67) for two children, 700 kuna (€93) for three children, 900 kuna (€120) for four children and 1,100 kuna (€145) for five children..

Pensioners with a monthly pension of up to 1,850 kuna (€247) will receive a one-off payment of 1,200 kuna (€160), those with a pension of between 1,850 and 2,350 kuna (€313) will get 900 kuna (€120), those with a pension of between 2,350 and 3,350 kuna (€447) will receive 600 kuna (€80) and those with a pension between 3,350 and 4,360 kuna (€581) will be paid a one-off amount of 400 kuna (€53). The total cost of this scheme is estimated at 450 million kuna (€60m).

Unemployed persons registered with the state employment bureau on 1 September will be paid 250 kuna (€33) for October, November and December. Vulnerable energy consumers will see their state subsidy increase from 400 kuna (€53) to 500 kuna (€67). The same increase will apply to foster parents.

Funding for the “Make a Wish” program aimed at employment of women will be increased by 245 million kuna (€33m). Non-taxable income for students will be increased from 15,000 kuna (€2,000) to 24,000 kuna (€3,200) for income earned in 2022.

The government also prepared a 100 million kuna (€13.3m) aid package for farmers, and the same amount was also earmarked for fishermen. Transport operators will receive 1.47 kuna per liter of diesel fuel reimbursement, and nearly 1 billion kuna (€133m) will be allocated for improving the energy efficiency of homes and apartment buildings.

The government will encourage the construction of solar power plants and heating stations, and will abolish the VAT on the construction and delivery of solar panels.  Some 3.8 billion (€507m) was earmarked for loans and guarantees to businesses, and 3.1 billion kuna (€413m) for bank guarantees to exporters.

Plenkovic also announced that the government would later introduce a “special profit tax” for businesses which posted increased profits since the crisis began.

“That’s the principle of fairness. This is no time to be earning excessive profits, that is morally unacceptable.”

(€1 = 7.51 kuna)