Lawmakers debate VAT cuts on fuel during energy crises

Croatian lawmakers on Tuesday debated proposed changes to VAT legislation that would allow the government to lower the tax rate on fuel during an energy crisis.

Under the proposal, VAT on fuel could be reduced by up to 10 percentage points, from 25% to 15%. Officials say the mechanism would be activated in the event of major global disruptions, such as an escalation of conflict in the Middle East that triggers new price shocks.

The opposition, however, is calling for guarantees that retailers would pass any savings on to consumers rather than keeping the difference.

“The aim of these changes is to protect consumers and maintain the stability of energy markets. Without a timely response, we could face serious consequences, including disruptions in energy supply and rising prices across a wide range of goods and services,” Finance Minister Tomislav Ćorić told lawmakers.

Most party leader Ivica Ledenko expressed skepticism that the measure would benefit consumers.

“This is a political decision that amounts to taking money from your left pocket and putting it back into your right pocket,” Ledenko said.

SDP MP Sabina Glasovac agreed, arguing that previous government measures had failed to ease the burden on citizens.

“The outcome is that citizens did not feel the impact at all. Food prices rose by 42%, with some items even doubling in price, despite all your measures,” she said.

Ćorić defended the government’s broader economic policy, saying Croatia is now better prepared to withstand crises.

“I believe Croatia has implemented many reforms over the past decade that have made it more resilient,” he said.

Možemo leader Sandra Benčić also questioned whether the VAT cut would translate into lower prices for consumers.

“The key question is: what will you do to prevent retailers from turning the VAT reduction into profit?” she asked.

In response, Ćorić said existing limits on margins should ensure the benefits are passed on.

“We have set a maximum excise duty, which means it is not possible for a VAT cut to be absorbed as extra profit. Sales margins for energy are limited, so a reduction in VAT should lead to lower prices,” he said.