Lalovac and Grčić Agree: VAT Reduction and Pension Increase Unsustainable

Finance Minister Boris Lalovac and Deputy Prime Minister Branko Grčić assessed on Monday that parts of the HDZ’s economic program regarding VAT reduction and pension increases are fiscally unsustainable measures.

Instead, they emphasized, it is better to work on increasing citizens’ income.

– A reduction of VAT by two percentage points and an increase in pensions by 5 percentage points are fiscally unsustainable measures, said Lalovac in response to journalists’ questions after the opening of the European Investment Bank Office in Zagreb. He assessed this as pre-election measures that, as he said, if HDZ comes to power, would actually be completely opposite because the budget would not be able to sustain them.

– A much greater effect on consumption comes from increasing citizens’ income than from the overall VAT, added Lalovac, promising for the next term a reduction of VAT on certain food products to an intermediate rate of 13 percent.

– This is a step that will not significantly burden the budget, and it will mean a lot for the competitiveness of entrepreneurs and will affect the relief of income, he said.

– Deputy Prime Minister Branko Grčić also does not believe in HDZ’s announcements regarding VAT reduction.

– I do not agree that someone could today reduce VAT by two percentage points and achieve some significant effects in the short term. This is not a good measure at this moment. The time for it will come when the economy accelerates further, the revenue side of the budget strengthens, and when a sufficient surplus is created for VAT reduction, Grčić stated, asserting that this will not happen tomorrow and that perhaps that is why HDZ is seeking two terms.

– He added that the government has shown that certain fiscal measures related to the tax system can significantly improve the economy.

– We have shown this by increasing salaries for more than a million citizens, which directly affected the growth of personal consumption and GDP. Secondly, by exempting reinvested profit from tax, we left 3.8 billion kuna in the economy, and the third major thing is that we enabled VAT payment for entrepreneurs only after they collect their invoices, said Grčić.