Finance Minister Zdravko Marić stated on Thursday that the proposal for the new capital market law aims, among other things, to open up the possibility for easier financing of small and medium enterprises, and announced that the Ministry will work on measures to revive the domestic capital market.
The government sent the proposal for the capital market law to the Parliament from its session on Thursday, which introduces European directives on the financial market into domestic legislation with the aim of further increasing transparency and protecting investors.
Marić said at a press conference after the government session that it is an extensive law, with 739 articles.
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– This is, as far as I remember from all the numerous laws that I have personally represented and defended as part of the Ministry of Finance team in my career, certainly the largest – 15 directives, 9 regulations that have been implemented into it. And actually, the main and key provision is the famous MiFID II directive, which we were obliged to implement, but it took some time to analyze everything and translate it into our legal system, emphasized Marić.
The MiFID II directive regulates all instruments traded in the market, not just equities.
– The economic and financial crisis has recently opened numerous questions and in a way it was necessary to regulate the segment of non-equity instruments, explained the finance minister.
Until now, non-equity instruments, such as derivatives or similar, bonds, etc., have largely been traded outside regulated markets, i.e., on OTC markets. From now on, most transactions that have been traded outside regulated markets will be transferred to regulated ones.
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– In Croatia, we are all very well acquainted with the situation in the capital market, which certainly requires not only such a regulatory framework but a whole range of other measures to stimulate it, stated Marić.
He announced that the government and the Ministry of Finance will work on measures and activities to contribute to reviving trading in the domestic capital market, which, as he emphasized, certainly has its perspective both in terms of overall trading and its contribution to overall economic development.
Platform for Small and Medium Enterprises
Marić also highlighted that the proposal for the law includes a platform for the growing market of small and medium enterprises.
– Particularly this segment of small and medium enterprises has faced one of the chronic problems in recent years, which is the lack of capital and quality sources of funds for their development and investments, he noted, adding that this platform would also open up opportunities for entrepreneurs for additional financing.
He also emphasized that an important segment in the proposal of this law is the protection of investors, and that other corrections have been made regarding the supervision of financial reporting by issuers, while Hanfa has received much greater powers and responsibilities.
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– All this additional regulation certainly has certain costs. At the EU level, estimates are that the one-time cost of implementing all these directives and regulations will amount to between 500 to 700 million euros, and that annual costs will range between 250 and 500 million euros, said Marić.
He stated that in the case of Croatia, these costs are not even close to that. He pointed out that only about 10 liquid issues are traded on the domestic market and that daily turnover is weak, that only bonds of the Republic of Croatia are traded on the OTC market, while the derivatives market is still in its infancy.
The capital market law has been amended seven times so far, primarily to align with the EU legal acquis.
To avoid confusion due to its numerous previous amendments, a new proposal for the capital market law was developed.
The drafting of the new capital market law took more than two years, and several working groups worked on it, considering that it is the most complex matter in the financial sector.
Further Tax Relief
When asked about the announcement by the head of the Tax Administration Zdravko Zrinušić from yesterday’s meeting with employers that VAT could fall to 20 percent under certain conditions and the implementation of reforms, Marić replied that the announcement of a rate of 20 percent is “a bit ambitious.”
VAT is, he says, an economic issue, and it always has political connotations.
– However, we look exclusively from the perspective of the Croatian economy, our companies, consumers, and citizens, but we do not only look at VAT, but also at corporate tax and all forms of taxation, as before, he added.
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He announced that new and additional analyses of the tax system and the effects of tax reform will be made during the year, especially looking ahead.
– With the space we have found and created in the budget, Croatia has practically annulled deficits of about five percent of GDP and a growing public debt, said Marić.
He emphasized that he remains committed to the need for further tax relief.
– In the weeks and months to come, we will work to come up with a comprehensive solution that would come into effect at the beginning of next year, said Marić, adding that he does not advocate any changes to tax regulations during the year, especially not larger ones.
– Through the tax system, we will try to provide a stimulus for investments and overall economic development, concluded the finance minister.
