The End of Cash Fraud: The Tax Authority Will Monitor All Transactions

The government adopted the proposal for the law on fiscalization in cash transactions at today’s session, which is expected to enable the Ministry of Finance to efficiently monitor cash transactions and combat the gray economy starting January 1 of next year, especially in hospitality and tourism, where the VAT rate will be reduced to 10 percent from the New Year.

The introduction of fiscal cash registers, which will be connected to the Tax Administration, is expected to put an end to the practices of almost all those who work with cash and who, according to Finance Minister Slavko Linić, report low revenues and low incomes.

Data shows enormous inconsistencies as it turns out that only 15 percent of total transactions are covered by cash transactions, with average daily incomes so low that one cannot live on them, says Linić. For example, in retail and repairs, the daily income is 85 kuna, in taxi services 65 kuna, in grocery stores around 100 kuna, and in cafes 95 kuna.

Fiscalization will not bring almost any additional costs to entrepreneurs as it will be implemented in such a way that existing computers with software solutions will allow access to central processing in the Tax Administration, and those entrepreneurs who still do not have a computer can acquire one for about 3000 kuna, notes Linić.

Only activities that can be controlled in another way, such as toll collection and payment of insurance or hospital co-payments, are exempt from the obligation of cash transaction fiscalization.

The most misunderstandings were related to legal services, but this has been resolved so that entering the fiscal accounting will not reveal the names of users of legal services, thus guaranteeing the confidentiality of legal work.

In addition, the new law aims to further limit cash transactions, as cash payments above 5000 kuna are no longer allowed, and legal entities, depending on their size, are allowed to retain a cash maximum.

The Ministry of Finance estimates that revenues from fiscalization will increase by one billion kuna, while state expenses in the first year will amount to 13 million kuna, and around 15 million kuna in the next two years.

These measures are expected to make the system transparent and significantly reduce the impact of the gray economy, and they are being introduced simultaneously with strong tax relief for the hospitality and tourism sector, as VAT will be reduced by 60 percent, emphasized Deputy Prime Minister and Minister of Economy Radimir Čačić.

Prime Minister Zoran Milanović pointed out that the tax burden is not increasing, but the prescribed tax must be paid regardless of some attacking the government for “scaring people to death”. This is not true; prescribed rules must be respected, and our political stance is that taxes must not be such that they kill people’s will to do business and motivation, he said.

He also referred to the fact that technological solutions for complete control of all costs in the public sector have been available for a long time, but until now there has been no interest in implementing them. We must know the data about every salary in the public sector at all times, which can be controlled from one place in the state, and this is more efficient, cheaper, and more reliable. Freedom is when a person submits to the law, not to an individual, Milanović stated, noting that this time he is not quoting the Bible but Voltaire.

The government also amended the regulation on the internal organization of the Ministry of Finance, which, among other things, introduces an office for large taxpayers, a sector for strategy and development, and a sector for taxpayer services that will assist taxpayers in interpreting legal acts.