Linić: Increase in the VAT intermediate rate will not affect citizens

Finance Minister Slavko Linić stated that there is no need to create panic over the increase in the VAT intermediate rate as it will not impact citizens.

The increase in the intermediate rate from 10 to 13 percent does not necessarily mean a price increase, just as the reduction of VAT from 25 to 10 percent did not bring lower prices in hospitality and tourism, Linić said in the central news program of HTV, discussing the possible consequences of the new measures presented today at the Government session.

He asserted that fuel will certainly become more expensive by the amount of excise duties, which are currently at the lowest level in the European Union and will go up, but the main influence on fuel prices will come from the movement of oil prices.

Regarding the new revision of this year’s state budget, which is announced for November, he stated that we will have a real revision in a month when it is determined what can be collected from old debts of tax delinquents. He reminded that this year, the healthcare restructuring has already cost three billion kuna, which were not included in the budget plan, and now lead to the need for a revision.

He reiterated that in 2014, Croatia will have more than seven billion in new expenditures – just entering the EU will cost us 4.7 billion, and new interest on reform measures and debts will be 2.5 billion. Therefore, he said, in the new Government strategy, part of the measures relates to tax rates and revenues, while the other part focuses on reducing consumption.

The Government’s reform measures apply to all ministries, as the system is changing. Linić claims that they are well-prepared and demonstrate how the Government continues to pursue a policy of savings and rationalization of all segments of consumption in Croatia.

When asked about the announcement of reducing the number of employees in the public sector, he explained that some employees will retire fully as they have met the conditions, while some in activities such as cleaning or food preparation will be transferred to the private sector. These people will still be employed, just no longer in the public sector, but in the private sector, he added.

He announced that Croatia will continuously borrow for the next 5 to 6 years, as, he says, taxes cannot be raised any further, and it is always questionable how far savings should go. “At this moment, these are the balances you see, but borrowing cannot be avoided,” Linić said.

He explained that debts have increased the most during the two years of this Government’s mandate (2012 and 2013) due to the implementation of reforms in state companies and institutions, such as railways, shipbuilding, and hospitals. “We are facing the completion of the consolidation and restructuring of these public companies. All of this is being added to Croatia’s debt, and all of it will be paid by taxpayers,” Linić said.

He accused some past Governments of having “not lifted a finger” to resolve the issues of roads, railways, forests, water, and energy. “This is now coming due. We are the ones doing this, and we will show how big the bill is,” Linić said.

He dismissed speculations that controllers from Brussels would come to Croatia due to excessive deficit. The Croatian Government will control the deficit with its measures, and today at the session, it showed the measures it intends to implement.

“The European Commission may be dissatisfied and demand tighter measures, and at that moment, the Government will have to change its policy and tighten further,” Linić said, who is convinced that the deficit and accumulated issues can be resolved in three years.

Regarding accusations of alleged bribery made against him by the portal Index.hr, Linić reiterated that he has no accounts in foreign banks, nor has he ever had one.