Plenković: Our last recourse is to influence the VAT rate

On Saturday the Croatian Prime Minister and HDZ Party President participated in an Electoral Assembly of the HDZ’s Association of Entrepreneurs and Craftsmen, where he announced that Government is currently looking at European excise duties and a reduction in the VAT rate as a potential tool that it will apply if and when necessary, given the circumstances of rising energy prices.

After participating in the Electoral Assembly of the HDZ's Association of Entrepreneurs and Craftsmen, Prime Minister Andrej Plenković confirmed that government plans on introducing a floating tax on fuel. Due to instability on the global energy market and the rise in fuel prices, government has forwarded into urgent parliamentary procedure amendments to the Law on Value Added Tax.

"The general VAT rate is 25 percent, we have prepared an amendment to one article of the law and it was released for public consultation last night and will be in consultation for about 10 days. After that, it will be adopted at a government session and forwarded into urgent parliamentary procedure. I believe that we will vote these amendments through by the end of April. In this way, Government would temporarily and extraordinarily - as a result of these circumstances - have the influence over the rate of the Value Added Tax on a bi-weekly basis, when we regulate energy prices. In this way we would be able to additionally reduce the prices. This is a measure that we will apply only if it is truly necessary. So, this is more a way to ensure that we have the tools, rather than something we will use immediately after it is adopted. Its application will depend on how circumstances develop in terms of energy prices," Plenković said.

Plenković said that up until now Government had reduced part of the excise duties that represent budgetary income, and somewhat reduced distributors’ margins.

“As far as excise duties are concerned, we have sent a letter to the European Commission asking for their consent to enter into that part of the excise duty, which would open up additional space for us. Our last recourse is to influence the VAT rate,” Plenković explained.

When asked how low the VAT will go in practice, Plenković replied that according to European regulations it cannot be lower than 15%. He reiterated however, that while this tool is being made available, there is no guarantee that Government will use it: “If there is a major escalation, then yes. But if it is roughly within the existing framework, no. As you have seen, on a comparative basis within the EU, our prices are among the lowest. It is unrealistic for us to go before Parliament every two weeks with amendments to the law. It is simply space that, in extraordinary circumstances, gives the Government room to act if it needs to.”

Source: HRT