Minister Primorac reveals whether a real estate tax will be introduced

Minister of Finance, Marko Primorac, said on Friday that the easing of inflationary pressures is expected to continue, that it is very certain that the Government will additionally revise its GDP growth projections, and that real estate tax is a very sensitive political issue and that it will not be in place during this government’s mandate. 

“We expect continued easing of inflationary pressures in the next period as well, and that the annual inflation average will be slightly higher than the European average, but they are not that worrying," said Minister Marko Primorac after the Government session.

The Croatian Bureau of Statistics published on Thursday the first estimate of the consumer price index, according to which the inflation rate in May was 7.9 percent compared to May 2022, while compared to the previous month it was 0.5 percent. This represents a slowdown of inflation for a sixth month in a row and its lowest rate since March last year.

Primorac said that the weakening of inflation is in line with expectations, and the Government's measures contributed to this, especially in the context of limiting electricity prices, as well as the impact on the market of other energy sources, which practically represent an input for the production of other goods, so in this way they also reflect on the prices of other products.

It is very certain that the Government will additionally revise GDP growth projections

When it comes to GDP growth in the first quarter by 2.8 percent, Primorac said that this growth was even slightly above expectations. “The government currently projects the growth of the Croatian economy in 2023 by 2.2 percent, however, considering the first quarter and with expectations of a good tourist season, the second and third quarters should also be "good", so it is very certain that the government will additionally revise its projections to more,” said Primorac.

When asked by journalists whether GDP growth above three percent can be expected this year, Primorac said that they are "not sure" at the moment and that the situation is still uncertain.

However, he reiterated that prospects are good, in the context of very favorable announcements of the tourist season, expected investments, including those within the National Recovery and Resilience Plan, as well as the acceleration of the reconstruction process after the earthquake, which will also stimulate demand and growth.

Germany, an important Croatian foreign trade partner and a market from which many tourists come, has entered a technical recession, but Primorac does not expect a significant impact from this news.

“The decrease in economic growth in Germany is not so worrisome and so large, but certainly all this information should be an additional caution,” said the Minister of Finance.

There will definitely be no real estate tax in this mandate

Given that many agree that real estate tax is a good idea, which is what the minister himself thinks, journalists asked him why it is not being introduced. Primorac said that real estate tax is a very sensitive political issue and that it will definitely not be introduced during the mandate of this Government, given that it is important to respect what is stated in the Government's program, which does not include it.

“Most countries of the European Union have this tax,” noted Primorac, but added that there is still no clear consensus on how it should be calculated and what the tax base should be.

He assessed that real estate tax is an instrument that would "complete the entire package" available to local self-government units and further increase their autonomy.

He also said that this tax is not easy to introduce, given the prerequisites such as arranging documentation and land registers. "If a decision is ever made to introduce this tax, all preliminary work will need to be done, and that requires a certain amount of time," said Primorac, noting that these preparations could take several years, so it is fair to announce the introduction of the tax on time.

Given that real estate tax arouses great public interest and several attempts have been made to introduce it, Primorac believes that both a broad consensus and a broad public debate are necessary for its introduction.

“If there is space and 'fertile ground' to do something like that, it needs to be communicated very well and explained to citizens,” he added.

Source: HRT