Prime Minister Andrej Plenkovic said at a cabinet session on Wednesday that the goal of the government's latest tax changes was "further tax relief and higher wages" as well as giving local government more fiscal powers.

This is a move by the government, and then parliament and the state, to directly increase citizens’ wages by changing the tax laws, and that is the number-one goal, he said.

The second goal is fiscal decentralisation which, along with functional decentralisation, was one of the two fundamental messages which local leaders sent the government in 2016, Plenkovic said, adding that the government has constantly been giving local government units more powers and more funds.

The spirit of these tax changes and the whole package is to allow those who are closer to citizens to make decisions, on the principle of subsidiarity, which will impact living standards in the communities in which they received the vote to govern for four years, Plenkovic said.

All the tax changes benefit citizens wherever they live, besides increasing the autonomy of local government units with regard to taxation and making the system simpler and more efficient, he added.

Sixth tax reform round

In the sixth tax reform round, the government is proposing the amendment of nine laws, which includes raising the non-taxable income to €560, the state’s participation in the payment of pension contributions for low-income citizens, and abolishing municipal taxes, while allowing local government units to set the income tax rate.

The amended laws would take effect on 1 January 2024.