ZAGREB, 16 Feb 2022 - Opposition MPs on Wednesday welcomed the government's measures to alleviate the impact of rising inflation on citizens, VAT reduction and its aid scheme, but noted that measures for the business sector were insufficient and belated and warned that margins could grow and prices stay the same.

SDP MP and former finance minister Boris Lalovac welcomed the scheme, noting that it was comprehensive and generous.

"These measures will definitely alleviate the impact of inflation, the market will stabilise and there are instruments to alleviate emergency situations," he said, adding that it would be good if the government introduced price monitoring to establish if VAT reduction had actually helped reduce prices of products for citizens.

Stephen Nikola Bartulica of the Homeland Movement said that the government should have reacted sooner, that its measures were welcome but few and belated.

Marijan Pavliček of the Croatian Sovereignists said that the government's measures were partially good but belated and that more attention should be given to farmers given that prices of their production materials "have gone up by 400%".

Romana Nikolić of the Social Democrats, too, believes the government's measures are belated and partially misdirected.

She recalled that her party group had proposed reducing the VAT rate on electricity and gas and raising the non-taxable income from HRK 3,800 to 5,000, which would result in a HRK 300 increase in all wages. Reducing VAT on food can result in an increase in trade margins while prices will remain the same, she warned.

Anka Mrak Taritaš (GLAS) said the government's measures for households were good and fair, but that those for the business sector were not sufficient and were belated.

"The government should accept the Opposition's proposals and reduce the price of labour to help the business sector," she said.

Zvonimir Troskot of the Bridge party believes the measures are belated but he welcomes the reduction of VAT and the redirecting of social transfers from the Energy Efficiency Fund.

He pointed to a lack of a long-term energy policy.

Sandra Benčić of We Can! said that the measures exceeded the expectations.

"I believe the social package is good, that it covers a broad group of people, which is good. It is good that all households will receive payments for heating, gas and electricity costs," she said, adding that subsidies for the business sector should have been higher.

She also welcomed the reduction of VAT but warned that without control mechanisms for extra profit from margins, citizens would possibly not feel the lowering of prices.

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ZAGREB, 16 Feb 2022 - The Croatian government on Wednesday launched an HRK 4.8 billion (€640 million) package of measures aimed at shielding consumers from rising energy prices.

The package includes the capping of the growth of electricity prices to 9.6% and the growth in prices of gas to 20%.

Furthermore, the Value Added Tax (VAT) rate on gas supplies and some agricultural products will be lowered.

The package also provides a rebate on domestic energy bills.

Unveiling the set of measures, Prime Minister Andrej Plenković said today that the package had been prepared in a systematic manner, and is "timely and all-encompassing".

The package contains the measures targeting households, businesses and agricultural producers, Plenković said adding that the state-run Croatian power provider HEP will also bear a part of the burden to address the rising electricity prices.

The measures encompass tax reduction, subsidies for citizens at risk of energy poverty, and one-off discounts on energy bills for pension recipients, while businesses, farms and fisheries will be entitled to subsidies to cope with the rising energy costs.

Cap for electricity paid to make HRK 460 million disposable to households

The caps on the rise in prices of electricity will make HRK 460 million disposable to households.

The subsidies for households using gas will include HRK 0.10 per kilowatt-hour.

The support will be provided to micro businesses and SMEs with the average annual consumption of gas up to 10 gigawatt-hour, and the discount will be HRK 0.15 per kWh.

The VAT rate on gas and heating energy will be lowered from 25% to 13%, the same VAT already applied on power. The lower VAT is a permanent measure.

VAT will additionally be reduced to 5% on gas as a temporary measure, in place from 1 April 2022 to 31 March 2023.

VAT to be reduced on some food in bid to tackle rising cost of living for households

The VAT rates of 13% will be reduced to 5% for fresh meat, fish, eggs, fruits, vegetables, cooking oils, and baby food and the the standard 25% VAT rate will be slashed to 5% on some items in the agricultural production (fertilisers, plants etc.).

The package aimed at tackling rising costs of living also includes the reduction of the 25% VAT to 13% on feminine hygiene products, such as tampons and sanitary towels.

The coupons for electricity bills for senior citizens at risk of poverty will increase from 200 to 400 kuna a month and will now also be applicable to gas bills.

Pensioners whose monthly income is up to HRK 4,000 will be also entitled to payments between HRK 400 and 1,200 under the the energy support scheme. 

(€1 = HRK 7.523717)

For more, check out our politics and lifestyle section.

As Novac/Dora Koretic writes on the 27th of July, 2019, Croatia's hoteliers welcomed the government's recent decision to reduce VAT in the hospitality sector down to 13 percent, however, the owner of the large Bluesun group, Jako Andabak, wasn't very impressed with these latest tax reforms, to say the least.

"Well, what can I say to you, I still don't think they really understand tourism. Instead of thinking two steps in advance, they only deal with what suits them right now, instead of acting proactively. If they really wanted to help, they would have to look at the complete situation in tourism and define the VAT rate at an even lower level,'' Andabak stated bluntly, and he further criticised the measures that the Croatian Government introduced for young people who get certain tax breaks at the ages of 25 and 30.

"And what happens then when that young man, after his 25th or 30th birthday, suddenly sees his wages drop? Who will make up for that? Probably the employers...'' said Andabak, adding that the measure is a populist one, as well as the fact that in his opinion, there is absolutely no real value to it at all.

His colleagues from HUT, led by Veljko Ostojić, welcomed the latest tourism-oriented measures in their official statement, announcing immediately that the money they would get to keep through lower VAT rates would then be invested back into raising the quality of the facilities and overall offer, as well as increasing employee salaries.

"In an increasingly complex market game in the Mediterranean, the tourism sector needs to boost investment in the quality of tourism supply, because we can only compete with the environment we're in with quality. Given that the consolidated net profit of the tourism sector in Croatia is less than six percent of the total income realised, only tax relief can release the funds needed to increase investment and raise salaries,'' they said from HUT.

Tourism Minister Gari Cappelli said on Friday for Hina that hoteliers announced a salary increase of ten percent as soon as the reduced VAT rate comes into force. However, it has been stressed repeatedly that the raising of wages and leve of quality for staff lies with the employers, not with the government or its measures.

In reducing VAT on food preparation and serving, the main goal, in his words, was not cheapening the offer, but stopping the outflow of personnel and raising the overall level of quality. He recalled the research that shows that 30 percent of tourists visiting Croatia come for the country's gastronomy.

The Minister of Tourism also highlighted the other two measures concerning tourism in the current tax reform sphere, and, according to his assessment, they went undetected all but fell below the media's radar.

These are the non-taxation of the cost of accommodation and food for all workers, ie, those who live on the premises of their workplaces, as well as payments for holiday service workers during the off-season, which is known in the public as the "cro card" project.

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