The government has announced the introduction of a property tax as part of a comprehensive tax reform starting in 2018. Finance Minister Zdravko Marić stated in recent days that existing simulations suggest that the changes will not increase expenses for the vast majority of citizens and that the government is ready to compensate local and regional authorities for the loss of revenue.
– When we talk about property tax, we are not talking about something revolutionary. It is about introducing another criterion into the utility fee, namely the age and quality of the property – said Marić for HRT.
One of the ardent, long-time advocates for the introduction of a property tax is former finance minister Slavko Linić, who once proposed a model in which taxes would only increase for those who own three, four, or more properties without function, or for entrepreneurs who have closed their operations, laid off workers, but retained large halls, spaces, and land. Linić reiterated his viewpoint in the current public debate, stating that the newly formed government will have support for implementing the reform.
– Property tax is nothing more than a replacement of the utility fee with acceptable taxes in Europe. The ministry, during my time, prepared a proposal that was logical and clear. It replaced the outdated tax from socialism and introduced a property tax. Those who have unused properties would pay more. We have a large number of properties in Croatia that are not in use, and that needs to be put to use. This is a tax on wealth that is not in use. If done this way, it will contribute to more responsible behavior towards properties. At that moment, it is possible to reduce health contributions – said Linić for N1 television.
On the other hand, equally committed long-time opponent of the introduction of a property tax, Guste Santini, says that properties are a form of savings and a “way of life” for us.
– Property tax should not be introduced for the following reasons: First, property is a result of savings, and we can only have savings after we have already paid income tax. Therefore, if we have already paid income tax, any further taxation is double taxation and as such contradicts the principles of taxation. Second, Croatia, having been part of the former socialist bloc, has not allowed citizens to invest their savings in any other form of property except real estate. Since they were forced to, citizens de facto consider that property as their personal investment for their third age, when they retire. Third, and also very important, property taxation is permissible in countries that have a surplus of savings, and a surplus of savings is defined through a balance of payments surplus. Since Croatia, with the exception of a few years, has a balance of payments deficit, this means that we have been importing savings. In other words, it is normal for a country like Germany, which has a problem with how to spend savings, to introduce property taxation, but this is not natural for Croatia as it has insufficient savings and is constantly borrowing to invest. Another reason why we should not tax part of the properties is that they are part of the living environment or life culture of individual families in Croatia. Taxing such properties directly changes the culture of living, which is not a small problem. Finally, if we want to tax properties, then they should be taxed as a business, not as a way of life – says the economist in a phone conversation for Lider.
In this week’s Fight Club, we ask whether Croatia should introduce a property tax?
