Croatian business asks FinMin Maric for tax deductions

The Croatian Chamber of Commerce HGK said during a meeting of leaders of dozen of the strongest domestic companies with FinMin Zdravko Maric on Thursday with regard to the fourth wave of tax reform that without further tax reliefs further wage growth and competitiveness was not possible, local media reported. The businessmen demand reduction of the income tax rate and increase of the non-taxable income — accommodation, transport, food supply. They also discussed overtime, increase in the recognized as non-taxable costs for using personal transport to 70%, special taxation procedure for travel agencies, among others. HGK president Luka Burilovic stated that the situation of businessmen is alarming as they face chronic shortage of labor force and pressures for wage hikes, which they can no longer finance by reducing profits as this seriously undermines their investments and development potential, and thus the business sustainability. HGK said that FinMin Maric responded that analysis of the possibilities of the fourth round of the tax reform is still being prepared, adding that the working group is taking on board the opinion of everyone, including the tax office, the academic community and businessmen. The finance minister also noted that the wishes are many, but that the government wants to further economically and administratively relax the economy while keeping public finances on track.

Recall that under the government third tax reform package adopted by parliament last year and in force as of this January, a lower income tax rate of 24% is applied to salaries up to HRK30,000 (instead of up to HRK17,500 until end-2018), while a higher rate of 36% remained for salaries higher than HRK 30,000. Another measure aimed to raise the disposable incomes of households was the VAT reduction, namely halving VAT on fresh meat and fish, fruit, vegetables, eggs and diapers to 13% from 25%, a VAT rate of 5% would apply to all medicines, regardless of whether they are prescription or non-prescription medicines, while the VAT rate of 13% would apply to services and copyright-related rights of writers, composers and performing artists. The third tax reform package was estimated to reduce the tax burden by some HRK2.3bn, thus resulting in combined tax burden reduction of HRK6.4bn since 2017.

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