Primorac announces a package of tax changes; relief for the most vulnerable groups

Finance Minister Marko Primorac announced on Thursday a package of tax changes that is expected to come into effect on the first day of 2024, which should, among other things, result in relief for the most vulnerable groups of citizens.

In response to journalists’ questions after the Government session where the Stability Program of the Republic of Croatia for the period 2024 – 2026 and the National Reform Program for 2023 were adopted, Primorac stated that there is a plan for tax relief, which he also mentioned in the context of last year’s achieved surplus of the consolidated general government of 0.4 percent, while the central government was in deficit of 0.3 percent, but the local government had a surplus of 0.6 percent of GDP.

Thus, income relief should occur for citizens in all income brackets, in terms of “changing and adjusting thresholds,” given that the current amounts converted from kuna to euros, at a fixed conversion rate, are not easily memorable.

Additionally, Primorac announced that changes to the income tax system would also be proposed, again in the direction of relief, specifically concerning those with low incomes.

Namely, as he emphasized, since increasing the basic personal deduction would no longer help the most vulnerable groups, but rather those in the middle and upper classes, other mechanisms for adjusting the tax system are being considered, as well as certain interventions in the contribution system, especially for pension insurance.

– We believe that in this way we could find certain solutions that will help those categories of citizens who allegedly could not be helped until now. Of course, everyone has been focused on the basic personal deduction, and increasing the deduction does not help them because they were not in the tax scissors anyway – said Primorac.

He emphasized that the primary goal is to utilize the fiscal space that exists at the level of local units for tax relief.

However, to avoid the impression that the tax system is being relieved at the expense of local units, the central government will propose certain solutions aimed at relieving the most vulnerable groups, that is, for those who have not been able to be helped through the increase of the basic personal deduction until now, noted Primorac.

He did not want to speak more specifically about the announced tax interventions, but revealing that the tax reform is in the final phase of internal consultations at the Ministry of Finance, after the entire planned procedure, the entire package of tax changes should be adopted by the end of this year and come into effect on the first day of 2024.

Primorac asked that requests for salary increases wait for the new law.

When asked about pressures from the public sector for salary increases, Primorac said that the improved macroeconomic situation indicates to all stakeholders who are financed in any way from state or local budgets to try to achieve an increase in their rights, which is legitimate and expected.

The government actually has nothing against this, said Primorac, but also noted that the process of adopting a new salary law, as well as regulations on salaries in state and public service, is underway, which will define salary grades and coefficients.

The minister stated that this is a comprehensive reform, “such as has not been carried out in Croatia for a long time,” adding that the current salary system is so complex that it is difficult to adequately analyze it.

The goal of the new law is to equalize rights and ensure that all employees have equal pay and compensation for equal work, said Primorac.

– Of course, I personally have nothing against the requests, but the requests for increasing coefficients in certain sectors currently disrupt that concept and jeopardize our commitment to adopting this reform measure, that is, the law that would ensure a better and fairer system – he stated.

At the same time, he asked all those who have legitimate requests for salary increases to wait for the adoption of the new law, and all groups that believe their salaries are not well defined were invited to join the working groups of the ministries, led by ministers Marin Piletić for public services and Ivan Malenica for state services.

Primorac noted that budget expenditures of around two billion kuna are planned for the implementation of the reform. Namely, the goal of the reform is for public sector workers to have the same or higher salaries, not for the majority of citizens to have their salaries reduced, he said.

Decision of Fortenova to seek a strategic partner is good

Primorac said he was not surprised by yesterday’s announcement from Fortenova about seeking investors to purchase part of the shares in the ownership structure, given that Fortenova needs to refinance part of its debts.

– I assume that refinancing these debts in the existing ownership structure, where you have certain entities that have been sanctioned, is complicated or perhaps even impossible – said Primorac.

The government is monitoring the entire situation, Primorac believes that the decision to seek a strategic partner is good, and he believes that it is a process that will be transparent and in which all entities can participate.

When asked if pension funds could be involved as potential investors, which was discussed last year, Primorac said he believes they can, moreover, he would have nothing against it and believes they will consider that opportunity.

Regarding Banožić’s subsidy: He has responsibilities to his family as well.

When asked about the approval of a housing loan with an APN subsidy for Defense Minister Mario Banožić, Primorac stated that the focus on government members and generally people from the “public sphere” is too great. On one hand, Minister Banožić has a moral responsibility as a minister and state official, but on the other hand, Primorac stated, he also has responsibilities to his family, children, and wife.

– So even Minister Banožić’s child may ask him in ten years: Dad, why didn’t you take the APN, when you could have? – reasoned Primorac.

He believes that ministers must be cautious in exercising certain rights, but if they use legitimate rights available to all citizens, according to Primorac, there is nothing controversial about it, especially considering Banožić’s announcement that he would renounce his right if he jeopardized that right for someone else.