ZAGREB, July 2, 2018 – Croatian Finance Minister Zdravko Marić said on Monday that a set of tax reform bills had been finalised, that it was being discussed by the government and the coalition partners, and that new tax breaks would be introduced on 1 January 2019.
Addressing a conference focusing on the future of the tax and pension systems, Marić said that he would go public with the new tax reform proposals in July.
He noted that a lot had been achieved in the last two years with regard to public finance, such as a fall in public debt, exit from the Excessive Deficit Procedure, and an improved credit rating of the country. "There is no need for a budget revision at the moment, we are planning the budget very responsibly and rationally. We are staying within the limits we have set, and all the surplus revenue will be used to reduce the deficit," said Marić.
He stressed that the government was aware that the taxation system was not the solution to every problem. "As far as the budget is concerned, responsible management of public finances is a precondition for overall economic policy and economic growth. We are not shunning responsibility, as some are saying, we are aware of the restrictions but we have to function within those restrictions. Both the pension and the health system are a major priority for the government, as is demography," said Marić.
He stressed that economic growth, employment and higher living standards were preconditions for dealing with the challenges in the pension and health systems.
The minister was asked by reporters to comment on the criticism that, on the one hand, the government had money for the purchase of fighter jets but on the other was trying to nationalise the second pension pillar, based on capitalised pension saving, by encouraging insurees to transfer their savings from that pillar into the first pension pillar, which is based on inter-generational solidarity.
"There will always be dissatisfaction with how budget funds are reallocated. It is the government's responsibility to propose to the parliament a budget which it believes reflects its priorities... concerning fiscal and economic policy. When you look at the big picture, budget items are planned but taking into account the entire context," he said.
He added that in the last two years the public debt-to-GDP ratio had fallen by six percentage points, that interest expenditure was falling, and that the image of Croatia's public finance was improving both at home and abroad. "We have been spending budget funds rationally and efficiently, never using surplus revenues to increase spending but rather to reduce public debt and enable further tax breaks," said Marić.
Asked if a cost analysis of the demographic measures proposed by President Kolinda Grabar-Kitarović had been done and whether some of those measures would be implemented, Marić said that a meeting would be held today to discuss those measures as well as what had been done and what was expected to be done in that regard.
"We have to look for more comprehensive solutions for that important area. There is no single measure or a magic wand to do away with all the challenges we are facing. But when it comes to pensions as well as population growth, we can hardly talk about sustainability without economic growth, wage growth and employment."
