Ivan Klarin: Draft Law on Financing Local Self-Government ‘Destroys the Standard of Islanders’

The mayor of the municipality of Tisno, Ivan Klarin, assessed on Friday that the proposal of the Law on Financing Local and Regional Self-Government primarily “hits” the island municipalities and cities in key changes related to the distribution of income from income tax, as the main source of revenue for local self-government units.

Finance Minister Zdravko Marić previously announced that a new Law on Financing Local Self-Government Units could be applied from the beginning of 2018, aiming to simplify the system while also strengthening local budgets.

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As emphasized in that ministry, the distribution of income from income tax has been simplified compared to the existing one, as a uniform distribution for all local and regional self-government units is proposed. The proposal is that the share of municipalities or cities in income tax revenue be 60 percent, counties 17 percent, the share for decentralized functions 6 percent, and the share for fiscal equalization 17 percent.

Destruction of community standards

Klarin, however, claims in a statement that such a legislative proposal abolishes 16 percent of the share of income tax that local self-government units have received over the past 16 years.

“Until now, these funds have been used to finance capital and development projects on the islands. With the new distribution of income, significant funds that local self-government units on the islands received from income tax are being redirected for fiscal equalization of all local self-government units in Croatia,” emphasized Klarin.

The goal stated by the Ministry of Finance is to reduce inequalities in fiscal capacity, i.e., a more equitable distribution of income tax funds.

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“Such measures will not affect local self-government units that are not located on islands. However, for those on the islands, it will drastically ‘thin’ income from income tax. The revenue side of the budgets of municipalities and cities on the islands will be significantly reduced by the new amendment to the legal regulation, and these island local self-government units will have to compensate for this loss with smaller allocations for the needs of their community’s living standards,” Klarin points out, adding that they will thus be forced to reduce funds for kindergartens, social allocations, scholarships, and more.

With this proposal, if it is persisted upon, along with the negative impact on the standard of the island population, Finance Minister Zdravko Marić encourages the emigration of the already small number of inhabitants on the islands, stated the mayor of the municipality of Tisno, Ivan Klarin, in a statement.