ZAGREB, November 3, 2019 - Finance Minister Zdravko Marić said on Saturday that both monthly and annual income tax calculations for young people were good models and that the most important thing was that young people would feel the tax cuts.

"We'll see how the parliamentary debate (on the government's tax relief proposal for young people) goes. The original proposal was to calculate reduced income tax monthly, but after the comments we received during the public consultation from young people, accountants, employers and others, we opted for annual calculation," Marić told Hina.

He was commenting on media reports that people under 30 will receive high wages because of tax relief only as of August 2021.

He said the proposal to cut income tax by 100% for people under 25 and by 50% for those aged 26-30 elicited great interest already during public consultation, when the bill said the cut would be calculated monthly.

But the bill the government eventually sent to parliament envisages annual calculation. "We believe the result of the measure is better and more effective with annual calculation," Marić said, adding that "both models have pros and cons" and that the government was open to discussion.

"If you opt for monthly calculation, you have a slightly higher monthly pay and slightly higher creditworthiness... Annual calculation makes it possible for the person to get the full amount during the calculation," he said.

More tax news can be found in the Business section.

ZAGREB, October 25, 2019 - Finance Minister Zdravko Marić and Croatian National Bank (HNB) Governor Boris Vujčić said that the progress made by Croatia in the latest Doing Business report was good news and that it should be taken as an encouragement for further reform.

Croatia has continued to improve its business regulations and is catching up with global regulatory best practices, the World Bank said on Thursday. Croatia placed 51st among 190 countries in the ease of doing business ranking, moving up from 58th spot last year.

Marić told reporters that the report provided a good picture and a good comparison with other countries in terms of where Croatia stands and in what direction it should be going. He said that all should be done to ease the conditions for doing business as a prerequisite for economic growth.

The minister said that the progress made was due to methodological adjustments and reforms that had been made in the last year, primarily with regard to starting a business, the transfer of ownership and obtaining a building permit.

"This improvement is good news and should encourage us all to continue in this direction. We should not be satisfied now and say, this is good, we have improved our rating, but should look forward," Marić said, adding that further progress should be made in structural reform.

Marić recently led a Croatian delegation to the annual meetings of the World Bank and the International Monetary Fund in Washington. He said that Croatia would continue to use World Bank loans for projects such as modernisation of land registries and further development of the judiciary for the purposes of the economy.

Vujčić said that the Doing Business report was a very important indicator of competitiveness and business climate. "I don't think we should be satisfied with 51st place, but should move on and make the economy even more competitive and further improve the business environment," the central bank governor said.

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

ZAGREB, October 23, 2019 - Finance Minister Zdravko Marić said on Wednesday that the budget for next year, which the government is expected to put forward next week, would be balanced regardless of the announced increase in the base pay for government and public sector workers, but he would not say if the job complexity index for education workers would be increased.

The minister said the government was working on a budget that included a 6.12% increase in the base pay of government and public sector employees, to be implemented in three rounds.

He noted that the increase would be compensated for by giving up on the planned reduction of the standard 25% VAT rate to 24%.

The pay increase will not reflect on the public debt or the budget's balance, Marić said.

Asked if he was satisfied with savings made in some sectors, he said that he was satisfied with the overall fiscal policy results.

Asked if teachers who are striking because of dissatisfaction with their wages and the government's wage policy for the public sector, could count on an increase in their job complexity index before the adoption of the budget for next year, the minister said: "We'll see", adding that the government had raised the base pay by 18% and that by the end of its term that increase could exceed 20% with tax reliefs.

He admitted that there was dissatisfaction with the regulation on job complexity indices and that the matter should be analysed.

Last week, the minister said that the announced increase in wages for government and public employees would cost annually between 1.1 and 1.2 billion kuna.

Speaking of tax reliefs, he said that measures such as raising the non-taxable income would increase the number of employees whose income was not taxed by 75-80,000 and that currently the income of 1.7 million people was not taxed.

The financial effect of raising the non-taxable income would amount to 500 million kuna, the minister said, adding that that money would remain in taxpayers' pockets. As for the fact that the amount would be lost on local government units, Marić said that compensation measures would be defined for local government units, which have income tax as one of the main sources of their income.

Postponing the reduction of the VAT rate by one percentage point will leave between 1.7 and 1.8 billion kuna in the state budget, the minister said.

More budget news can be found in the Business section.

ZAGREB, October 23, 2019 - Finance Minister Zdravko Marić said after a three-hour meeting of the ruling coalition on Tuesday evening that the coalition was agreed that the budget and public finance framework for next year was good and should be maintained.

"We are all agreed, I believe that all members of the coalition and the parliamentary majority agree that the budget and public finance framework for next year is good and should be maintained," said the minister.

The ruling coalition discussed at its meeting a budget revision for this year, the 2020 budget and the fourth round of the tax reform.

Asked if there was room in the budget to increase wages as much as striking teachers' unions wanted, Marić said: "We must be very clear, you are aware of the restrictions for next year's budget, we have to stick to them. The overall framework is sustainable and we are not bringing it into question. It is a question whether there is additional room for additional increases. Everything should be in line with possibilities."

Asked again if this meant that the six percent wage increase offered to teachers was the government's maximum offer, the minister said: "That's right".

As for an increase in the minimum wage announced by Prime Minister Andrej Plenković earlier in the day, Marić said he did not have any specifics and that they would be known after a government session.

He said that the dialogue on the budget and taxes would continue in the coming days, and that the related legislation should be formulated by the government next week and then forwarded to the parliament in the first half of November.

The minister said that the government spent as much as it earned and that any surplus would be directed into the business sector.

The minister also said that he believed the Croatian People's Party (HNS), a junior partner in the ruling coalition, would support the budget.

As for criticism from Milan Bandić, the mayor of Zagreb and leader of the Labour and Solidarity Party, which is part of the parliamentary majority, that local government units would again lose a lot in the fourth round of the tax reform, Marić said that that would be discussed at a later stage.

He said that the government was not giving up on measures for young people and would put them forward as planned.

More budget news can be found in the Business section.

ZAGREB, October 17, 2019 - Finance Minister Zdravko Marić said on Wednesday that the planned pay rise for state administration and public sector employees would cost between 1.1 billion and 1.2 billion kuna annually.

Marić said that the planned increases were expected to take effect at the beginning, in the middle and in the second half of next year, adding that during the term of this government the base pay increase for state administration and public sector employees would be around 18.3 percent.

In an annual report on his government's work submitted to Parliament on Wednesday, Plenković said that the government would offer a 6.12% wage increase to all state administration and public sector employees in three 2% rounds, which was why the planned reduction of the standard 25% VAT rate by one percentage point, set for January 1, would be postponed.

Marić said that the government would also tackle the issue of the job complexity index and bonuses defined by different contracts, adding that a detailed analysis of civil service jobs would be carried out.

Speaking of the plan to increase non-taxable income from 3,800 to 4,000 kuna, the minister said this would increase the number of taxpayers not subject to income tax by 75-80,000. He noted that 1.7 million citizens were currently not subject to income tax.

Marić said that about one million other employees would also be subject to higher non-taxable income and that the financial effect would depend on their wages.

The total effect of this measure is 500 million kuna, which should end up in citizens' pockets, while local government will be left without this money. Marić announced compensation measures for local government units. The delay in reducing the VAT rate by one percentage point will leave between 1.7 billion and 1.8 billion kuna in government coffers, the minister said.

Marić said that despite the planned measures there would be no departure from the set economic and fiscal policy guidelines, adding that the 2020 budget would be balanced in that regard.

More budget news can be found in the Business news.

ZAGREB, October 15, 2019 - Finance Minister Zdravko Marić said on Tuesday that the government is continuing its policy of increasing wages and improving the financial status of all state administration and public-sector employees.

"Each day we are monitoring what is happening and I do not have anything new to say at the moment. I can just reiterate everything that has been done until now through increases of the base wage and tax reliefs. I repeat, we do not plan to stop here. Our idea is to continue the policy of increasing wages and improving the financial status and conditions for all state administration and public-sector employees," Marić said.

Marić attended a conference organised by the Hanza Media group entitled Quality Corporate Management. He commented on the strike in the education sector and added that the dialogue would continue.

"It is our responsibility to look at the system in its entirety. I am certain that in the end we will recommend something on the back of what we have been doing all along. Wages are not at the bottom of our list of priorities but in fact at the very top," he said.

He underscored that the government, acting within budget, was appropriately rewarding work and creating prospects for everyone entering the labour market.

"We are trying not to distinguish between individual sectors. All state administration and public-sector employees contribute to our society, and we want to improve the quality and efficiency of all services," he added.

Asked whether the state budget would collapse if union demands were met, Marić reiterated that public finances have to be regarded as a whole.

"We are looking at it as a whole. Every portfolio has a defined limit. We increased the base wage by 3% at the beginning of the year and by an additional 2% that entered into force on 1 September. That additional 2% was not planned in the budget but we will secure these funds through savings in various budget items during the year," he noted.

"Everything will be clearer when next year's budget is presented," he said, and because the budget was planned well this year there will be no need for a revision.

He commented on increasingly calls from the opposition for union demands to be met. "The leaders of the parliamentary majority and coalition partners will talk. For me it is important that public finances and the economy are executed without any obstacles," Marić said.

When it comes to a possible snap election, Marić said that he wasn't the person to comment on that, however he commented on Zagreb Mayor Milan Bandić's statements that he would only support a government that worked for the benefit of the people.

"The government is working for the benefit of the people. We all have our ideas but we have to draw the line somewhere. With due respect, I don't think that the solution is always of a financial nature," he said.

More news about Finance Ministry can be found in the Politics section.

ZAGREB, October 2, 2019 - Finance Minister Zdravko Marić said on Wednesday that the government is always prepared for talks with teachers' unions, which have announced strike action in elementary and secondary schools for October 10.

The unions have said that the strike will last until their demand is met for a 6% increase of the job complexity index in the education sector. They called out the government because even two weeks after talks were held the government has still not presented its stance.

Speaking to reporters ahead of an inner cabinet meeting, Marić said that the government is always prepared for talks. "My message to the unions is: I will say what I have to say at a meeting," he said.

Marić said that the unions could count on a frank and transparent discussion with him, adding that he will first tell the unions what he has to say to them and then inform the public.

Marić announced that in the coming days a meeting would be held with government employees' unions as well as talks with public sector unions. "There will be meetings not just with teachers and health workers, but also with others who wish to hear what we have to say," Marić said.

Asked whether his job was being made difficult by ministers who defend unions in the media, he said that he doesn't meddle in the work of his colleagues. "Each one of them and each one of us are working the way we think we should be," he said.

He commented on an announcement by Health Minister Milan Kujundžić that funds to settle debts to drug wholesalers would be secured through a budget review, saying that the budget review is generally made at the end of the year.

"Until now most of the funds in budget reviews went to the health sector. There will be a review at some point but I would not connect it to liabilities and debts of the health sector," said Marić.

He said that budget funds were allocated to the health sector over the past few years, recalling a financial injection of 1.5 billion kuna in 2017 and an additional 500 million kuna last year and the 1 percentage point of health contributions this year. "We provided funds from the revenue side. I am not the one that needs to answer for what happened on the expenditure side," Marić concluded.

More public finance news can be found in the Politics section.

ZAGREB, September 26, 2019 - Deputy Prime Minister and Minister of Finance Zdravko Marić on Thursday said that the decision to bail out the national flag carrier Croatia Airlines was not just economic but that there were economic grounds for it because of the domestic air carrier's importance for tourism.

Asked why the government was bailing out Croatia Airlines with state budget funds, given that Slovenia's Adria Airways and the British Thomas Cook tour operator cannot count on that sort of support, Marić said that that was a "legitimate question that requires a responsible approach."

"I am not happy or satisfied when situations like this occur because until then no one asks too much nor analyses the situation until it occurs, and then it is usually the eleventh hour or even past that," he said.

Croatia Airlines has a big role in tourism and connecting Croatia with the world, Marić said, adding that the company and Croatia's airports have big potential.

Asked whether the airline's bailout was just an economic issue or a political one as well, Marić said that when a bailout occurs it can never exclusively be just for economic reasons, but in this case the economic criteria go in favour of preserving the national flag carrier.

We cannot, however, ignore the fact that recently there have been several challenging situations for airlines, he added.

The Croatian government today approved a payment of 100 million kuna from budget reserves to Croatia Airlines as the first instalment of a 250 million kuna grant in an effort to pave the way for the airline's recapitalisation by stabilising business.

Prime Minister Andrej Plenković said that he expects the company to consolidate so that it can prepare for changes, "keeping account of new partnerships that are essential."

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

ZAGREB, September 18, 2019 - The Croatian Finance Ministry on Tuesday put to month-long public consultation nine bills from a fourth round of tax reform, which, among other things, envisage tax breaks for young people, a lower, 13% VAT rate for the hospitality sector, etc.

The latest round of tax changes was outlined in late July by Prime Minister Andrej Plenković and Finance Minister Zdravko Marić, who then said that the fourth tax reform round was expected to reduce the tax burden by 3.75 billion kuna.

Amendments to the Income Tax Act propose the income tax on people under 25 years should be scrapped and on those aged 26-30 cut by half.

Under these proposals, these tax deductions would apply to an annual income of up to 360,000 kuna.

This would result in an increase in the net salaries of young people and contribute to putting a stop to the emigration of young and highly educated people to work abroad.

The Finance Ministry estimates that these tax breaks will result in a drop in the revenue of local government units of 800 million kuna.

These changes would also enable employers to make non-taxable payments for their employees' supplementary and additional health insurance up to a certain amount and based on credible documentation.

The standard VAT rate of 25% will be reduced to 24% as of next year, and the latest amendments to the VAT Act envisage also the entry into force, as of 2020, of a lower, 13% VAT rate on food preparation and serving in the hospitality industry.

The lowering of the VAT rate in the hospitality industry is expected to reduce the budget revenue by around 900 million kuna annually.

As for profit tax, the government has proposed that businesses with an annual revenue of less than 7.5 million kuna be subject to a 12% rate, up from the present 3 million kuna.

The profit tax rate of 18% will stay in force for those who earn more than 7.5 million kuna annually.

The amendments also raise the threshold from which physical persons who are small business owners and are subject to income tax have to pay profit tax and keep business records according to accounting rules, from HRK 3 million to 7.5 million in receipts annually.

Amendments to special taxes on coffee and non-alcoholic drinks introduce taxes on non-alcoholic drinks, depending on sugar content, as well as additional taxation of energy drinks.

Instead of the current definition of fruit syrups, the amendments introduce a definition of added sugars (monosaccharides and disaccharides) and preparations that contain sugar, except for juices that do not contain added sugar or sweeteners.

Under the amendments, the special tax on coffee and non-alcoholic drinks would be paid depending on product weight or volume, sugar content, and the content of caffeine, methylxanthine and taurine.

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

ZAGREB, September 12, 2019 - Croatian government budget revenues reached 65.1 billion kuna in the first half of 2019, an increase of 8.5% on the same period in 2018, while expenditures increased by 8.3% to 66.9 billion kuna, according to a report on budget execution adopted at a government session on Thursday.

The budget deficit was 1.88 billion kuna, roughly the same as last year.

Presenting the report, the State Secretary at the Ministry of Finance, Zdravko Zrinušić, said that positive economic developments had continued in the first half of the year, with real GDP increasing by 3.1% compared with the first half of 2018.

Tax revenues increased by 4.8% to 37.1 billion kuna, with VAT revenues going up by 4.7% to 23.5 billion kuna. This was mainly due to increased spending as a result of positive economic trends, Zrinušić said, recalling that additional tax reliefs had become effective at the start of the year.

Profit tax revenues reached 5.3 billion kuna, up 8.3%, and revenues from special taxes and excises rose by 2.2% to 7.3 billion kuna.

On the other hand, revenues from contributions declined by 2.2% to 11.9 billion kuna, which Zrinušić said was due to the effects of the tax reform at the start of the year, namely the abolition of contributions on employment and safety at work. The health insurance contribution was increased at the start of the year, but it does not count as a budget revenue, the report notes.

The 8.3% rise in expenditures was due to the better absorption of EU funds. Expenditures financed by EU funds reached 6.2 billion kuna, an increase of 1.8 billion kuna or 42% on the first half of 2018, the report says.

More economic news can be found in the Business section.