Government presents changes to tax regulations

The government has presented changes to tax regulations, which increase the personal deduction for income tax calculation to 560 euros. 

The limit for taxation at a higher rate of 30 percent has been increased, and the state will pay part of the pension insurance contribution to those whose gross salary is in the range of 700 to 1,300 euros.

“With an intervention into the system of calculating contributions for pension insurance we will achieve the following results: People that have up to 700 euros will have an increase of the average net salary by 42.9 euros. People that have from 700 to 900 will have 34.3 euros more monthly. People with 900 to 1100 will get 20.6 euros. People on the 1100 to 1300 category will receive 6.72 cents more. These figures drop as the gross or base salary increases, which is fair and fulfills the goal that salaries dominantly increase for those with the lowest salaries,” said Minister of Finance Marko Primorac.

Primorac added that this will cost the general state 437 million euros. Revenues from pension insurance will decrease by 329 million euros and revenues from income tax, considering the increase in the personal deduction, will decrease by around 100 million euros.

Presenting the changes, Prime Minister Andrej Plenković recalled the high growth rates of local government revenues during his Government's mandate and that state co-financing of the pension contribution rate was the only way to increase the lowest wages.

“The first goal is to increase living standards of citizens by increasing salaries, especially those that are the lowest. The second is to increase buying power of households, and the third is to strengthen fiscal autonomy of municipalities and cities. We politically opportunistically believe today, that it is useful and opportune, for people in this situation, especially those with the lowest incomes, it is better that we with our decision enable a higher net salary and the state compensates a portion of funds with s little more than it would otherwise give,” said Prime Minister Plenković.

Surtax will also be abolished, but local administrations can actually include it in the new income tax rates, which they will determine themselves, within the ranges determined by the Government for municipalities, cities and counties.

The parliamentary opposition called the new round of tax reform a game and taunting with political opponents.

“The government has decided to play the game "We'll increase your salaries and the evil mayor will take it away." The other message which is even worse is "We already have a hole in the pension system and we'll increase that hole a little." Why? Because it hinders business. Because he needs the GDP for next year for the elections,” said Boris Lalovac from the Social Democratic Party.

“We, especially in the city of Zagreb where surtaxes in reality make up 10 percent of regular revenues for the city, cannot financially survive the discontinuation of surtaxes, unless we increase rates for income tax to the maximum ceiling. But that doesn't mean in any way that any decision on increasing the price of utilities was adopted,” said Damir Bakić from the Možemo Party.

“Behind closed doors they congratulate each other, not because they have certainly secured salaries increases, because we'll only see if it happens because of local self-governments, but because they have outwitted political opponents. It's a political game and that is truly defeating,” said Marija Selak Raspudić from the MOST Party.

Source: HRT