The parliamentary Finance and Budget Committee on Thursday supported the appointment of Marko Primorac as the new Minister of Finance, who said that now is not the time to impose real estate taxes, and also stressed the need for further tax relief and care for the most socially vulnerable.

After being introduced to the committee by Prime Minister Andrej Plenkovic, the ministerial nominee answered questions from the committee’s members, including one from Zvonimir Troskot (Most party) regarding the potential introduction of a real estate tax.

“That is the best option of financing local government units (…) and I was absolutely in favour of introducing a real estate tax and I regret that the government did not introduce it at the beginning of its term, but also, that it had not been introduced by previous governments. I absolutely think that it should have been introduced,” said Primorac, adding that a majority of the best regulated economies have such tax.

However, given the situation we are in and the rising rate of inflation, Primorac assessed that now, is definitely not the time to introduce a real estate tax.

“Personally, I will certainly not work on introducing this tax. Not in these circumstances (…) Personally, I would be the happiest if I could introduce it because I am absolutely in favour of it. However, I am aware of the fact that right now is not the time for self-promotion and the realisation of some kind of personal ambitions. Now it is time for prudence, calmness and concern for citizens’ welfare,” said Primorac.

He is of the opinion that property, especially when it comes to real estate, is undertaxed, which has created a kind of tax oasis, whereby many want to be involved in the rental business.

“I believe that the tax burden should be more fairly distributed and that citizens with the lowest incomes should receive additional support. Those who are at risk do not rent real estate, that is done by those who have more properties. If in the future there is a redistribution of the tax burden, I will personally advocate for it to head in that direction,” said Primorac.

Primorac is an associate professor at the Faculty of Economics in Zagreb, and he teaches  public finance, local government finance, Croatian tax system and public debt management in the Croatian language, as well as public finance in English.

He said that he is absolutely familiar with the ministry in the most important segments and that he will “get the hang of it” very quickly. He is aware of the challenges, and although the decision was not easy, he decided to accept the candidacy, judging that that was an “absolutely responsible and patriotic decision.”

Limited instruments of fiscal policy to fight inflation

Speaking about the fight against inflation, he pointed out that the instruments within the framework of fiscal policy are relatively limited.

“The standard tools for fighting inflation are primarily monetary policy,” he noted, but also added that in the current circumstances, monetary policy is also facing challenging times because rising interest rates can negatively affect economic growth and lead to recession.

On the one hand, fiscal policy can fight against inflation by reducing state expenditures or increasing taxes, whereby Primorac said that the latter is “absolutely out of the question in these circumstances.”

“If I assume this office on Friday, I will direct absolutely all my knowledge and resources towards tax relief and care for citizens. So, fiscal policy in this segment and in these circumstances cannot be effective in fighting inflation, but it must be effective in helping citizens overcome the crisis that is ahead of us,” said Primorac.

He also said that he is “not a magician,” so if there is a recession in Europe, it will certainly spill over to Croatia.

Special care for the most socially vulnerable

Responding to SDP’s Branko Grcic, he said that at the moment great care is needed for entrepreneurs and also for the most socially vulnerable.

He pointed out that inflation affects those with higher incomes much less, so when the new autumn package of measures to mitigate the consequences of inflation will be discussed, Primorac will advocate that subsidies are not distributed to everyone, but that those with the lowest incomes should be more strongly helped.

He also said that the budget is being filled somewhat better than in circumstances when inflation is not present, but due to the indexation of pensions and salary growth, there is strong pressure on the expenditure side of the budget.

Namely, Grcic said that one of the focuses of the new anti-inflation package should be helping entrepreneurs through subsidies and reducing VAT for electricity, given that their electricity bills have increased up to three times. He is also of the opinion that social benefits must have a model of continuously adjusting to inflation.