The announcement of a reduction in income tax pleasantly surprised many, as such moves by the government are generally not expected immediately after elections, but what is certain is that not everyone was pleased, writes Jutarnji list on Friday.
Revenue from income tax has been fully allocated to local budgets since 2018, and according to data from the Ministry of Finance, it amounted to 14.6 billion kuna last year. If Prime Minister Andrej Plenković remains steadfast in his decision to reduce the income tax rate from 36 percent to 30 percent and from 24 percent to 20 percent starting January 1 of next year, rough calculations by tax experts indicate that local units could lose around two billion kuna.
Given that the current structure of local self-government would struggle to bear such a loss of revenue, the question arises whether the government’s announcement of reducing income tax rates hides a slightly more ambitious plan. This could be concluded if one judges by statements made during the pre-election campaign, including that of the Minister of Administration and member of the HDZ Central Committee, Ivan Malenica.
Along with reducing the number of ministries, Malenica stated that they would 'halve the number of local officials, and do everything to make public administration efficient and effective'. This includes extending digitalization to local self-government and connecting all local bodies and institutions with central state registries, numerous services, applications, and platforms.
What dynamics the government will adopt for these changes remains to be seen, but it can be expected that alongside the reduction of income tax rates, measures will also be implemented to address the problem of revenue loss for local units, reports Jutarnji list.
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