Čačić on Tax Reform: I Welcome the Reduction of VAT on Food

The President of the People’s Party – Reformists Radimir Čačić welcomed on Wednesday the Government’s decision to abandon the linear reduction of VAT by one percentage point, and instead reduce VAT on certain food products, but also warned that the proposed changes in contributions will result in only a slight increase in the lowest wages.

“It is good that there is a serious reduction of VAT for the existential needs of the most vulnerable segments of the population, namely food. This will undoubtedly have quite concrete consequences for price reduction,” said Čačić ahead of the coalition partners’ meeting in the Government.

Lower VAT on fruits, vegetables, fish, and meat

Finance Minister Zdravko Marić presented this reform on Monday at the HDZ Presidency, and according to unofficial information, citizens will only feel the reduction of VAT on fruits, vegetables, fish, and meat.

Regarding the increase in health contributions on one side and the abolition of contributions for employment and disability on the other, Čačić proposes a different solution as he believes that what has been proposed will have a negligible effect on the lowest wages.

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“These two things have no comparable sizes because on one side there is an increase from 15 to 16.5 percent, and on the other 0.7 and 1.5 percent. It is pointless to set things up this way; I think it should be viewed completely differently. The threshold for the exemption of 50 percent of contributions should be raised from 3,800 to 5,000, as it does not threaten cities, municipalities, and counties through income tax, and it significantly helps a part of Croatian citizens with the lowest incomes up to 5,000 kuna and gives them a chance to increase their salary between 380 and 500 kuna,” said Čačić.

He emphasizes that with the proposed changes, wages will not rise because the difference in contributions will amount to 0.7 percent, which, as he said, on a salary of 4 or 5 thousand kuna is an increase of 20 to 25 kuna.

Marić: We must also think about healthcare, which is in trouble

Finance Minister Zdravko Marić said that he cannot look at an individual segment in isolation. “It would be nice and simple if I could only and exclusively take care of taxes and contributions; however, in our circumstances, we are all very much aware of the problems facing the healthcare system,” said Marić before the meeting, as reported by HRT.

Member of Parliament Josip Salapić from HDSSB called the Government’s announcement that citizens earning an average salary will pay lower contributions, while those with higher salaries will pay higher contributions, a healthy, life, human, and political logic before the coalition partners’ meeting.

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“We will see, everything is being discussed; we believe that those with lower wages, average wages, have lower burdens on their salaries, while those with higher wages have higher burdens; that is healthy logic,” said Salapić.

“HDSSB supports the work of the Government; we are discussing everything, reforms and steps are needed, but in the time ahead, we will assess what is best for all citizens of Croatia together,” added Salapić.

Mišić: Where are the two billion kuna going?

We advocate that there should be no burdens for citizens; we are a stable Government, we support the social, European measures of the Government, discussions must take place, those who earn more should pay more, while those with average salaries should pay lower contributions because that is healthy logic, life, as well as human and political, explained the stance of HDSSB.

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Member of Parliament Ivica Mišić said that he would be able to make any comments after the proposed changes are presented. He also noted that his demands are that contributions for healthcare should not be raised, which would not be good for entrepreneurs. However, as he added, “we see that all moves so far have some logic.” He added that at the meeting he expects an answer to the question of where the two billion kuna are going, which is the amount in the budget representing the reduction of VAT by one percentage point, from which the Government has withdrawn, given that it is “serious money.”