ZAGREB, February 18, 2020 - Finance Minister Zdravko Marić said on Tuesday that the economic situation in Croatia is satisfactory but that further reforms are necessary given the always present question of how sustainable the existing situation is.

"Progress is necessary because even though the current economic situation is satisfactory, with a growth rate of around 3%, balanced public finances, a current account surplus and a further drop in public debt, there is always the question of the sustainability of such a situation," Marić told reporters who after a meeting of EU finance ministers in Brussels asked him what he expected of the report on macroeconomic imbalances in the EU which the European Commission is expected to publish soon.

The minister went on to say that the global financial crisis of several years ago showed that things can change rapidly and that it was necessary to constantly work on structural reforms.

"As far as Croatia is concerned, monetary and fiscal policies have yielded and will continue to yield results, but focus must now be on reforms," he said.

Marić expressed the belief that the report to be released by the EC next week would recognise the progress made but that Croatia had to focus on the recommendations which it had not implemented yet.

He called for launching a public debate on the health care system and on the dependence of the national economy on imports, with a systematic approach and with as little populism as possible.

Asked which reforms he considered the most important, Marić cited the issue of wages and bonuses, the organisation of work in the state and public administration, reform of the health sector as well as of the judiciary, which, he said, should be more at the service of the business sector.

Speaking of ECOFIN, Marić said that the EC was today given recommendations for the 2021 budget, which is the first budget to be drafted as part of the new multiannual financial framework.

"I expect the multiannual financial framework to be adopted in the coming period and the EC to make a draft budget for 2021 in May or June," Marić said.

Answering a reporter's question, Marić said that today's ECOFIN meeting also included an informal discussion on the process of selection of the new head of the European Bank for Reconstruction and Development (EBRD).

The current EBRD president Suma Chakrabarti's term expires in May this year.

Marić said the dialogue on the matter would continue, primarily at the level of finance ministers. "I cannot speak or speculate about the candidates at the moment," he said.

He recalled, however, that with regard to the EBRD as well as the European Investment Bank (EIB), a debate had been launched about the EU's new financial architecture.

"The selection procedure for the EBRD president should be viewed in a broader context. As a country with long-lasting membership in multilateral organisations, including the EBRD, Croatia wants activities in countries where the EBRD has been active so far to continue, but we will take into account also new proposals regarding the new financial architecture and expansion to some other countries of the region," he said.

The EBRD signed its first agreement in Croatia in 1994 and so far it has supported 211 projects worth more than €3.8 billion.

More economy news can be found in the Business section.

ZAGREB, February 18, 2020 - Finance Minister Zdravko Marić said on Tuesday that increasing the national share of co-financing EU projects would mean additional pressure on the state budget, adding that he was confident that discussions on this topic at the EU level would result in a good compromise.

Ahead of a second meeting of Economic and Financial Affairs Council (ECOFIN) under Croatia's EU presidency in Brussels on Tuesday, Marić commented on plans to increase the national co-financing component for EU projects from 15% to 25%.

European Council President Charles Michel on Friday proposed a new Multiannual Financial Framework (MFF) for the period 2021-2027 worth €1094.8 billion, which is equivalent to 1.074% of the 27 member states' gross national income

Michel also proposes that the member-states should be supposed to co-fund projects by 25%.

"The proposal is here, a lot of countries have their own opinions about that," the Croatian minister said and added that that is an important issue for Croatia as the youngest EU member state that still has not managed to completely absorb EU funds.

Croatia currently has agreements for the absorption of 86% of allocated funds and a little more than 31% has been paid out.

"Naturally, we are taking account of the national budget too and in that light, an increase in the national component of co-financing would create additional pressure the state budget. The proposal put forward is a good basis for debate and dialogue," Marić said.

The minister is confident that the dialogue will be constructive and, in the end, that it will produce a good quality compromise.

Today's ECOFIN meeting of EU finance ministers has been convened to adopt a revised list of non-cooperative jurisdictions for tax purposes in the framework of new conclusions on this matter.

Marić recalled that the first two lists were compiled in 2017 with the aim of meeting standards and best world practice in an effort to improve the exchange of tax data, boost transparency and generally to curb tax evasion.

"In the period behind us more than 50 countries met the demands that we had defined for them, and this is the result of constructive dialogue. They are no longer on those lists. The intention now is to continue that dialogue with those still on the list so that they too meet the criteria," Marić said.

As of 14 November 2019, the EU list is composed of American Samoa, Fiji, Guam, Oman, Samoa, Trinidad and Tobago, US Virgin Islands, and Vanuatu.

During today's meeting, EU finance ministers are expected to expand that list to include Panama, the Cayman Islands, Seychelles and Palau.

More news about EU funds can be found in the Business section.

As Novac/Frenki Lausic writes on the 8th of February, 2020, at the same time as talks on the increase in excise duties on non-alcoholic beverages and cigarettes are going on, the Ministry of Finance is also negotiating with companies in the alcoholic beverage industry. According to unofficial information, the tax administration's working proposal is to increase these excise duties by about 30 percent, starting in early May, which will see alcohol prices in Croatia rise.

Novac's sources didn't want to talk in more detail about the proposal put before them by the aforementioned ministry, but that they would see prices in Croatia rise, making a litre bottle of Pelinkovac for example increase from 100 kuna to 104 kuna.

When asked if more specific information about how much excise duties would increase depending on the alcohol content - because there are different excise duties for different alcoholic beverages, meaning the excise duty or calculation on alcoholic beverages over 1.2 percent is not the same for drinks with alcohol content of over 22 percent - the response was that only information that the initial proposal of the Ministry of Finance and the Tax Administration was available. That information foresees, as stated, an average increase in excise duties of about 30 percent.

The Croatian Employers Association (HUP and the Croatian Chamber of Commerce (HGK) have declined to comment on this topic so far and have claimed that there is no official proposal from the Ministry of Finance.

However, Novac's sources in the beverage industry have pointed out that several working group meetings have been held, and at these meetings, the Ministry of Finance has proposed an increase in excise duty of about 30 percent. It is somewhat understandable why HUP, HGK, but also the alcoholic beverage producers don't want to come forward with more detailed information on the current proposals, because there is an agreement not to release the information to the public before a final decision is reached.

However, some of Novac's interlocutors are from the beverage industry, and the situation was similar with the working group for increasing excise duties on non-alcoholic beverages. They believe that the Ministry of Finance wants to raise excise duties as much as possible with as little media attention and public noise as possible. So, just after Jutarnji list announced that excise duties on sugar in soft drinks will be increased by an average of 100 percent, and for Red Bull by as much as 1450 percent, the Ministry of Finance softened its first proposal for alcohol prices in Croatia to rise, Novac was unofficially informed.

The Ministry of Finance had suggested that the linear taxation of 30 kuna per hectolitre should still be maintained, although industry representatives had had it announced to them that they would abolish this provision (so far this had amounted to 40 kuna per hectolitre) and that strong taxation should be introduced based on the taurine and methyl-xanthine content.

The beverage producers then demanded that linear taxation per hectolitre be abolished and that the content of additional sugar, taurine and methyl-xanthine be taxed at a rate of 10 percent for those beverages that have those amounts below five grams per 100 millilitres, at a rate of 20 percent at a share of five to eight grams, and at a rate of 50 percent to a share of over eight grams.

In further talks, the Ministry agreed to reduce linear taxation to 20 kuna per hectolitre, which means that, for example, excise duties on a bottle of Coca-Cola would rise by 100 percent instead of 120 percent. These negotiations are still under way, so further adjustments are possible, but the excise duty on tobacco will still, as things stand, become more expensive, so a box of cigarettes will be two kuna more expensive.

Industries who supply non-alcoholic beverages, alcoholic beverages and tobacco are aware that there will be an increase in excise duties, but much milder, especially for non-alcoholic beverages and alcoholic beverages. All of them point out that the increase in excise duties will shift to consumers.

Yesterday, the taxpayers' association Lipa (Udruga Lipa) responded in a statement against the increase in excise duties on soft drinks and tobacco, saying they oppose a re-increase in the tax burden, which they say is the sole aim of patching up the budget deficit caused by the non-implementation of reforms and Croatia's signature non-transparency.

They note that they believe that the Croatian Government will increase the overall tax burden with these regulations, but that the money raised is not intended to be spent on improving the health sector, but that it "serves to patch up the budget deficit."

"Although the Ministry will refer to an EU Directive, it should be noted that the EU continually recommends that Croatia implement reforms in all parts of the public sector, and these recommendations are largely ignored," Udruga Lipa said in a clarification of their position.

For more on prices in Croatia, follow our lifestyle and politics pages.

ZAGREB, January 21, 2020 - The European Union's finance ministers on Tuesday convened in Brussels to discuss digital taxation, the European Green Deal Investment Plan and some other topics, and this is the first meeting of EU finance ministers under the Croatian presidency of the Council. "I am sure that we have prepared ourselves well for this task, this is the peak moment of the job my team has been doing for several months. Of course, we are excited. It is a great honour to preside over the Council of the EU on behalf of Croatia," said Croatian Finance Minister Zdravko Marić in Brussels on Tuesday morning.

Marić said that the ECOFIN (Economic and Financial Affairs Council) had a plenty of topics to discuss.

Reaching agreement n the Multiannual Financial Framework (MFF) for the 2021-2027 period is one of the priorities.

On Tuesday, the European Commission will give a presentation of the economic and financial aspects of the European Green Deal Investment Plan (EGDIP) to the ECOFIN.

Also referred to as Sustainable Europe Investment Plan (SEIP), the EGDIP is the investment pillar of the Green Deal. It will mobilise at least 1 trillion euro in sustainable investments over the next decade, according to the information on the EU website.

Finance ministers will discuss tax challenges arising from digitisation. They will take stock of ongoing negotiations in the context of the OECD on the reallocation of profits of digital businesses and on a minimum tax rate for multinational enterprises.

More news about Croatia and the EU can be found in the Politics section.

ZAGREB, January 3, 2020 - By the end of 2019, more than 91% of legal entities or 155,000 were registered in the Register of Beneficial Ownership and those who did not register will have to explain why they didn't, Finance Minister Zdravko Marić said on Friday.

He said that the purpose of the register is to create a database of beneficial ownership, which does not necessarily mean only business entities. Unlike court registers the beneficial ownership register is a lot more detailed and contains associations, foundations and a range of other institutions.

"The end of the year was the deadline to register (...) and more than 91% of entities entered their details, which means more than 155,000 entities," said Marić.

The deadline set by the EU for corporate and other legal entities to be registered is 10 January 2020 and for trusts and similar legal arrangements by 10 March, said Marić ahead of a cabinet meeting.

According to Marić, the purpose of the register is to further reduce the risk of money laundering or terrorist financing and other forms of tax fraud.

The register will be public and a certain level of information will be accessible to the public while government institutions and law enforcement institutions, particularly those involved in preventing money laundering and terrorism financing will have a complete insight in the register's details.

"We will determine why some, and there is about 8% of them, have not registered yet," added Marić.

The Register of Beneficial Ownership was established pursuant to the Prevention of Money Laundering or Terrorist Financing Act. The Registry is controlled by the Financial Agency (Fina) on behalf of the Ministry of Finance Office for Prevention of Money Laundering.

The register was established on 3 June 2019 for legal entities while associations were able to register as of 1 July.

Legal entities and trusts were obliged to enter the details of their beneficial owner in the register by 31 December 2019.

According to legal provisions, beneficial owners are any natural person(s) who is the beneficial owner of the legal entity, controls the entity or controls it in some other way, including a natural person(s) exercising an extremely effective control over the legal entity.

All companies, branch offices of foreign companies, associations, foundations, trusts, institutions of which the Republic of Croatia or the unit of local (regional) government is not the sole founder are obliged to join the register.

More business news can be found in the dedicated section.

ZAGREB, December 2, 2019 - The customs officers' union on Monday held a meeting in the Ministry of Labour regarding working conditions and adjusting the wage indices in customs services, with customs officers claiming that their wage indices are 20% lower compared to other employees in the Ministry of Finance.

"Customs officers are working in poor conditions. Legal provisions and the collective agreement are not adhered to. We are rarely given new uniforms and we have to buy our own toilet paper and soap. Overtime work is not paid and regular health check-ups are not conducted," union leader Rino Štorić said after the meeting with the ministry's representatives and in the absence of Labour Minister Josip Aladrović.

Štorić said that legal provisions and the collective agreement for about 2,800 employees are not adhered to.

He claimed that there is a lot of differences in the wage indices within the customs service and that they have warned the Ministry of Finance of this discrepancy for years, but without any response.

"Our last demand was sent to the prime minister personally, yet we did not receive any response. I hope that the government has realised that for years it is has been causing confusion in public services. They are the ones who adopt regulations on indices and define the rules of the game," said Štorić.

The customs officers' union expects a concrete response to its demands within seven days at the most. If the government does not respond in that time, the union will submit a complaint to the International Labour Organisation that workers' rights are not be respected.

Štorić added that customs officers are prepared to wait for the foreign consultants the government has announced will amend the regulation on wage indices.

He added that the union wants its status to be resolved as it is currently exposed to unprecedented pressure which threatens to shut down the union.

More news about trade unions can be found in the Politics section.

ZAGREB, November 29, 2019 - The Croatian parliament on Friday voted in a set of nine tax laws making up the fourth tax reform which brings tax reliefs in the amount of HRK 2.4 billion.

The changes bring a lower, 13% VAT rate on food and dessert preparation and serving in and outside catering establishments, and a lower VAT rate for holders of phonographic rights.

As for income tax, the non-taxable income has been raised from 3,800 to 4,000 kuna. Income tax for young people under 25 is reduced by 100% while income tax for young people aged 25-30 is cut by 50%.

As for profit taxation, the limit for taxation with the higher, 18% rate, is raised from 3 to 7.5 million kuna, which means that 93% of entrepreneurs will pay taxes at a rate of 12%, while the current share of entrepreneurs is 85%.

The tax reform also keeps the standard VAT rate of 25%, the total financial effect of that measure being 1.8 billion kuna.

The fourth round of the tax reform brings tax reliefs in the amount of 2.4 billion kuna, and together with the three previous rounds, the total financial effect is 9 billion kuna in tax reliefs.

Parliament today also adopted amendments to the law on ferry transport and occasional coastal transport aimed at creating better conditions for the exercise of the right to transport concessions, particularly for the disabled and children with developmental disabilities.

More tax news can be found in the Business section.

ZAGREB, November 27, 2019 - The government on Tuesday sent to parliament for a second reading amendments to laws from the fourth tax reform round which envisage 2.4 billion kuna in tax relief.

Under amendments to the Value Added Tax Act, the general VAT rate would remain 25% and a 13% rate would be applied as of next year on the preparation and serving of food in and outside restaurants.

It is estimated that the lower VAT rate in the hospitality industry will reduce budget revenues by 900 million kuna annually.

In relation to the first reading, the government is proposing a 13% VAT rate also for phonographic rights owners, said Finance Minister Zdravko Marić.

Also in relation to the first reading, the bill stipulates the taxation of foreign income. If a taxpayer reports a foreign income, interest due to the passage of time will not be charged, which Marić said would stimulate the reporting of foreign income.

Prime Minister Andrej Plenković said the total tax relief in the four rounds of the tax reform totalled nearly 9 billion kuna.

More news about taxes in Croatia can be found in the Business section.

ZAGREB, November 14, 2019 - The Croatian parliament on Thursday adopted the state budget for 2020 with 80 lawmakers voting in favour, 41 against and one abstention.

The budget, proposed by the government, plans 145 billion kuna on the revenue side and 147 billion kuna on the expenditure side, and a majority of government departments can expect a rise in their funding from the state budget.

The budget has been prepared with the assumption that Croatia's economy will grow 2.5% in 2020.

The government plans 6.7% higher revenues in comparison to the original 2019 plans, that is 5.4% more in comparison to the revised budget which was also adopted by the parliament today.

The expenses in the next year's budget are higher by five percent, that is by seven billion kuna, in comparison to this year, and by 8.3 billion kuna in comparison to the revised budget in 2019

As a result, the projected budget gap in 2020 is put at 2.15 billion kuna, accounting for 0.5% of Gross Domestic Product.

HDZ party whip Branko Bačić said on Thursday that the vote on the state budget earlier in the day showed how strong the ruling majority in the parliament was, stressing that he did not share the view that the budget did not include striking teachers' demands.

"The documents that had to be adopted were adopted by a majority of more than 80 votes, which proves the strength of the ruling coalition and the HDZ group. I don't think that the budget does not include education-sector workers' demands for a six percent wage increase because the government did secure funds for that increase. You would not be able to tell from the budget if it refers to an increase in the base wage or an increase in the job complexity index because the total amount of the increase is as demanded by the education-sector unions and next year each teacher and employee in the education sector will get a wage increase as demanded by the unions," said Bačić, adding that therefore there was no longer any reason for the unions to continue striking.

Commenting on the European People's Party (EPP) decision not to hold sessions of its Presidency and Political Assembly in the Croatian Parliament on November 20 and 21, as originally planned, but at a different venue in Zagreb, Bačić said that the EPP did not want to cause any inconvenience either to its members or the HDZ, and that it wanted to avoid creating the impression that the Croatian Parliament was leased to a political group.

Bačić said this was not about giving in to demands by the opposition in the Croatian Parliament but about a proposal and decision by the EPP, made in agreement with the HDZ, so that the planned political event could be held in a pressure-free atmosphere.

The EPP, the strongest political group in the European Parliament, will for the first time hold its electoral congress in Zagreb on November 20-21. The event is hosted by HDZ leader and Prime Minister Andrej Plenković and EPP President Joseph Daul. More than 2,000 delegates from some 40 countries will be discussing current European policies. The EPP congress will elect a new EPP leadership.

More budget news can be found in the Politics section.

ZAGREB, November 6, 2019 - During a debate in parliament on Wednesday about amendments to this year's budget, Finance Minister Zdravko Marić boasted about responsible management of state finances while the opposition had a different view.

"Croatia has a balanced budget. For four years in a row we have not crossed the originally defined limit. We are acting in line with our financial capacity," Marić said presenting the amendments to the most important financial document for the state.

The amendments foresee an increase in revenues of 1.6 billion kuna or 1.2% to 137.7 billion kuna while overall expenditure is being decreased by 1.3 billion kuna, from 140.3 billion kuna to 139 billion kuna.

Referring to macroeconomic indicators, Marić underscored that it was clearly visible that economic activity was growing, that positive trends had been identified in some economic sectors but that certain challenges were also visible.

In the first half of the year, economic growth was 3.1% with a strong contribution from personal consumption, the minister said, adding that the government was glad about increased investments and that the export of commodities and services had continued to grow, albeit not at the rates recorded in previous years.

Bridge MP Miro Bulj accused Minister Marić of boasting about the budget revision but that he did not present the "most important truth."

"The most educated Croats have emigrated and last year made remittances in the amount of 5% of GDP or 2.4 billion euro, that is a disastrous policy," Bulj said.

Emigration and demography are aspects that go beyond a one-year budget, Marić retorted.

"You were one of those who raised their hand to reduce teachers' salaries," Marić responded to MP Gordan Maras (SDP) who asked where (Marić) had managed to find 120 million kuna he was now offering education-sector workers and why there was no money to meet their demands worth 400 million kuna yet there was 280 million kuna to buy out the APIS IT - Information System and Information Technologies Support Agency, which is owned by the City of Zagreb.

"Are you buying (Zagreb) Mayor (Milan) Bandić's support?" Maras asked.

"Your government reduced job complexity indices and wages, while this government has raised wages by 18.3% without any tax changes," Minister Marić responded.

"Next year's budget foresees a 2+2+2% (wage increase), but the additional 120 million kuna, to be secured if the regulation on job complexity indices is not defined, is not foreseen by the 2020 budget. Neither was an additional 2 percent foreseen for this year, yet we managed to come up with those funds through redistribution," Marić said.

More budget news can be found in the Business section.