Some of the promises announced ahead of parliamentary elections will not be fulfilled.
Economic analyst Guste Santini commented on the recent pre-election debate between SDP president Zoran Milanović and HDZ president Andrej Plenković, as well as on economic promises which are made by political leaders ahead of September’s parliamentary elections. He said that it was evident that these were more pre-election messages rather than well-founded proposals and explained that both leaders were right when they said that the corporate and income tax rates should be modified, but they were wrong about the value-added tax, reports Lider on August 15, 2016.
“I believe it is important to increase the non-taxable part of salaries, and Plenković is right about that, although he did not present any arguments. In general, tax reform is necessary in Croatia at the time when the nation states are increasingly turning into market-oriented states. The fact is that we are a member of the European Union and the external regulations are a determining factor for the decisions made within the country”, he said.
However, he strongly reacted to the promise regarding the lowering of VAT, which both potential future prime ministers announced. “Reducing the VAT rate is unthinkable and counterproductive in a market-oriented country. We need to reduce taxation on labour and capital, and identify VAT as a market rent. Our market is a part of the single European market, a Frenchman in Croatia is a Croat, an Englishman in Croatia is a Croat, and the same goes for our citizens in other European countries. Therefore, VAT should be seen as a rent on our market. People should look at it and say: If you want to sell on our territory, you should pay VAT”, said Santini.
“Also, VAT is the tax of the future. Since VAT taxes the added value, the tax burden on labour and capital should be reduced, as they are already being taxed using VAT”, he concluded. Santini also said that HDZ promised to reduce VAT during every election campaign, although there are no realistic prospects for that.
He added that the previous government had made mistakes regarding taxes and social policy. “Milanović's government increased the tax pressure and that was counterproductive. It is simply impossible to have a good social policy without an employment policy. Milanović’s interpretation involves separation of social and economic functions, although the development of the economy and economic recovery are giving a better dynamic to the overall policy of prosperity. It is important to point out, regarding the question of poverty and other pressing social issues, that no speaker offered a solution during the debate. I think that this dialogue has not recognized the situation in which Croatia finds itself”, said Santini.
