The government sent a new set of tax amendments to the second parliamentary reading last week, which are expected to come into effect at the beginning of next year. On this occasion, Prime Minister Andrej Plenković called on cities and municipalities to take advantage of the new regulations, which will, among other things, abolish the surtax on income tax, raise the threshold for applying the higher income tax rate, and increase the personal deduction.
The Prime Minister stated, as reported by Index, that the government continues with reforms aimed at increasing wages, especially for those with the lowest incomes, and strengthening the tax autonomy of local self-government units to subsequently raise the standard of living for citizens.
Finance Minister Marko Primorac also presented the new tax amendments at the meeting, reiterating the abolition of the surtax. He stated that the government itself proposed new rates for income tax on property and capital, assessing that it makes no sense to grant autonomy to local self-government units in their regulation, which would further complicate the system.
– If we did not make these amendments that we are now proposing, those who earn income from property and capital would be less taxed by this amount of surtax, thus finding themselves in a more favorable position, which was not the goal; it would practically be a ‘side effect’ of these amendments – said Primorac.
He also emphasized that by prescribing fixed increased rates, the revenues of local self-government units would increase, albeit by a small amount, but it would still allow them to provide additional relief on wages.
More Dominant Taxation of Property and Capital
– Thus, we are taxing property and capital somewhat more dominantly and opening up space for a more dominant relief of labor – said Primorac, adding that for units that did not have a surtax, the increase in revenue would be somewhat greater compared to before.
When it comes to the category of income from property and property rights, for the subcategory of income from property earned from rent and lease, which was subject to a rate of 10 percent plus surtax, a new rate of 12 percent is now being established, and the same figures apply to income from the disposal of special types of property. Furthermore, for income from the temporally limited transfer of property rights, for which the old rate was 20 percent plus surtax, a new rate of 24 percent is proposed, and the same applies to income from property related to the disposal of real estate and property rights. The estimated effect of these measures is €5.96 million.
