Primorac: Tax reform will not damage the pension system

Finance Minister Marko Primorac said on Tuesday that the announced tax reform will not damage the tax system, and will give local authorities the opportunity to reduce the tax burden and increase citizens' salaries.

“I think it is much better and more transparent that the relief that would help those with the lowest salary be implemented in the pension insurance contribution system,” said Minister Marko Primorac at the American Chamber of Commerce (AmCham) conference "Sustainable Tax System - Policy, Practice and Perspectives".

According to him, the government took measures so that during the new round of tax reform, it would not damage the pension system.

He reiterated that the government plans to increase the autonomy of local self-government units and give them the opportunity to set their own income tax rates within the given framework, which will be prescribed by the central government. He pointed out that it will not be without limits and that these ranges will be sustainable.

“Tax policy has an important role in strengthening social security, relieving the economy and helping the most vulnerable,” he said.

He believes that it will increase the competitiveness of the economy.

“AmCham welcomes the tax changes and considers it a good opportunity for Croatia and its economy,” said AmCham president Andrea Doko Jelušić.

“In this round of tax reform, too, AmCham expects further relief for salaries, which will lead to greater purchasing power of citizens in conditions of inflation. However, tax policy should continue to focus on tax relief for business in order to enable additional investment in innovation, growth and development, and retention of the workforce in Croatia,” said Doko Jelušić.

In the Recommendations for the reform of the tax system in 2023, AmCham proposes to increase the non-taxable personal deduction to 650 euros, reduce the rate of income tax from 20 percent to 10 percent and the tax rate from 30 percent to 25 percent, and reduce mandatory contributions.

AmCham also proposes the application of option plans in limited liability companies, with a reduction in the tax rate from 20 to ten percent, and that the value of receipts from option plans be considered gross receipts, in order to avoid potentiation of the effective tax rate.

Minister Primorac confirmed the introduction of option plans for limited liability companies. This means that the owners of such companies will be able to give their key employees shares in the company and thus additionally reward and retain them.

“We assume that there is room for additional tax relief, maybe not for all local self-government units, that's why we didn't do it horizontally, that's why we didn't say we're increasing the personal deduction by significant amounts so that some local unit ends up in significant financial difficulties, given that they have different fiscal needs, we left them the possibility so that those who can and want to relieve the citizens additionally can do so,” said Minister Primorac.

Source: HRT