The government-sponsored set of nine tax laws, which abolishes local government units' surtax and leaves them with the possibility to raise income tax rates to compensate for the loss of revenue from municipal surtax, should be amended in second reading, Jutarnji List daily says.

This will make it possible for local government units to avoid maximally increasing income tax rates.

According to the daily, the Finance Ministry is willing to accept suggestions to amend the Income Tax Bill to raise tax rates for income from property and property rights and income from capital.

The first version of the bill, which envisages compensating for the loss of revenue from municipal surtaxes by raising tax rates for income from employment, also abolishes surtax on income from property and property rights and income from capital.

In the case of Zagreb, this means a loss of revenue of €20 million, said member of parliament Damir Bakic of the We Can! party.

The city of Zagreb, which has the highest municipal surtax rate of 18%, is set to lose close to €140 million in revenue due to the abolition of municipal surtax, and its authorities have said that the city will compensate for the loss by introducing the maximally allowed income tax rates of 23.6 and 35.4%, which means that for Zagreb residents with average wages, who will not benefit from pension contribution breaks, those wages would increase minimally due to an increase in personal deduction to €560.

In the last quarter of this year cities and municipalities will have to make decisions on income tax rates and even though Zagreb Mayor Tomislav Tomasevic has said that the city authorities will have to maximally raise income tax rates, now room is being made for that not to be so but for those rates to be raised less than planned, which would enable a slightly higher increase in wages for Zagreb residents as well, the daily says.