July the 30th, 2021 - Finance Minister Zdravko Maric has announced that he does indeed intend to slash VAT on food during a recent guest appearance on RTL Danas (Today).

As Poslovni Dnevnik writes, before we take to the subject at hand, it's worth noting that Finance Minister Zdravko Maric did not accept the proposals of the National Association of Caterers on lowering VAT on beverages and respecting labour costs as a tax deduction. Let's look at precisely why didn't he satisfy this association's wishes.

"We always end up talking about VAT somehow..." stated Maric.

"It's not just a question of satisfying or not satisfying people's desires. I mean, we always end up talking about VAT whatever the topic is. I do emphasise all the time for the hospitality sector, as well as for all other activities, this government in the past and this term, despite the pandemic, has conducted several rounds of tax relief to stimulate activities, employment, the raising of wages… Of course, in the wake of all this we're continuing to work hard, and caterers always come up with this suggestion that the only exclusive variable is VAT. One of the interlocutors in this regard was the co-owner of a restaurant. Let's just sit down and demystify a few things now. So... complete accommodation in tourism, complete food and service is already at a reduced rate. We're only talking about bars here,'' Maric said.

What would those numbers look like?

"We're talking about approximately half a billion kuna. Now, looking at the data we have from the past year, it's certain that the pandemic had a significant share in the hospitality sector, however, you know that the hospitality sector has been recognised with our measures since day one. At a time when it was horizontal for all sectors, and to this day the hospitality industry is one of the few that is the recipient of measures to preserve jobs and cover fixed costs.''

There has been a lot of talk about VAT in the last term of this government as well, it was promised that the general VAT rate would be reduced. In the end, that didn't happen. Is it a topic at all anymore?

"It isn't in the government's programme at the moment. Let me remind you, there was a reduction in the income tax rate, especially for young people, you know that it all came into force and that it has already been done. Young people can testify to that, I'd also say that they were pleasantly surprised with those tax refunds. What follows, when the conditions for that are created, is written in the government's programme that the reduction of VAT will be applied to all food in general, but we'l see when and how we'll implement it,'' stated Finance Minister Zdravko Maric.

Next came the topic of the pandemic-dominated season, and we're not just talking about tourism here. Maric was asked if he was worried about the epidemiological situation and the possible sudden end of the tourist season, to which he responded:

"I think we really do all need to contribute individually to prevent that from happening. We aren't talking only about tourism here but also all other economic activities. The third quarter is generally the strongest in terms of economic activity. Very soon our children will return to school. We really have a lot of segments that we have to take care of in order to finally gain this victory over the virus and to be able to live normally again,'' Finance Minister Zdravko Maric replied.

The European Commission has now officially adopted Croatia's National Recovery and Resilience Plan. What's the next phase? When do the first funds arrive and what will they be used for?

"At the end of August, the government will authorise the signing of a financial agreement with the EU. After that, I expect a 13 percent advance in September of somewhere around 820 million euros. By the end of the year, Croatia must meet the 34 criteria it listed in the document, which is the basis for withdrawing an additional 700 million euros in the first half of next year. By the end of 2022, we need to meet the requirements that will ensure the withdrawal of 46 percent of the total envelope of money, which is very good news because it means that at the beginning of this period, we'll be able to use the most funds,'' concluded Finance Minister Zdravko Maric.

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ZAGREB, 27 July, 2021 - Finance Minister Zdravko Marić on Tuesday did not accept proposals for a lower VAT rate on beverages and to treat labour costs as a tax deduction, while a representative of restaurant and bar owners said they would have to fend for themselves the best way they can regarding future challenges.

"My message to all restaurant and bar owners in the country, notably those who run bars, is that a very demanding period is ahead of us and that they will have to seek new loans and funding, despite the fact that we had yet another constructive meeting with the finance minister today. We can hope that in a couple of years we will have better working conditions because now that is not the case and we have not come across any understanding in regard to our proposals," Jelena Tabak, who heads the NUU association of restaurateurs, said after the meeting.

Marić recalled that a lower VAT rate was already in place in the tourism sector for accommodation, food and for the serving of food and that beverages were the only products for which VAT had not been reduced.

Commenting on the proposal to exclude labour costs from the base amount for the calculation of the VAT rate in the hospitality sector, the minister said that neither Croatia's nor the EU's tax systems recognised such a measure.

"In terms of taxation, labour costs are indeed recognised costs but in systems in which they should be recognised - the income and profit tax systems. We cannot mix direct taxes with indirect taxes such as VAT," he explained.

Marić recalled the government's measures to help the business sector, from lower taxes to the cancellation of individual contributions, as well as expanding the scope of nontaxable income, which, he said, had resulted in a rise in employment and wages, as evidenced by statistical data.

He recalled the government's job-keeping measures and coverage of fixed costs in the hospitality sector, stressing that data on fiscalisation showed that the hospitality sector had solid results and that the real peak of the tourist season was yet to come.

Dražen Biljan of the bar owners' association of the NUU Zagreb branch said that they were not happy that their proposals were not accepted and that lowering VAT on drinks would not cost the state too much, around HRK 400 million. It would, however, mean a lot for restaurant and bar owners, he said.

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ZAGREB, 2 June, 2021 - The budget revision, proposed by the government today, keeps Croatia in a safe financial zone, Finance Minister Zdravko Marić said after the cabinet's meeting on Wednesday.

The proposed budget changes set the general government deficit at 3.8% of GDP, and the government believes that this increase still keeps Croatia in a safe zone in terms of economic and other activities as well as in terms of the opinion of credit rating agencies and the European Commission, he added.

The government is committed to reducing the public debt from 88.7% to 86.6% of GDP, this year, Marić said, announcing one more revision of this year's budget.

The proposed revision, adopted today, will probably be on the government's agenda next week.

The minister said that he was looking forward to a meeting with Zagreb's new mayor Tomislav Tomašević, and that he and his team would be at the disposal of the newly elected local authorities.

"As far as Zagreb is concerned, I am sure that the mayor and I will meet to discuss several things," he said, explaining that with regard to additional borrowing, laws were clear and applied equally to everybody.

Among the topics to be discussed with Tomašević is a limit on borrowing, he said in a comment on the topic of possible new borrowing, explaining that the amount needed to service debts and cover loan guarantees this year must not exceed 20% of last year's revenue.

With regard to the purchase of fighter jets for the army, Marić said that the government would be guided by pragmatic criteria only. Therefore, a certain amount could be paid as an advance this year, he added.

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ZAGREB, 25 May, 2021 - The Croatian Employers' Association (HUP) has proposed measures for maintaining liquidity and launching private investments which include retaining jobkeeping measures and covering a portion of fixed costs, ensuring favourable loans and prolonging loan maturity.

In expectation of COVID measures and lockdown of businesses being lifted, HUP addressed Finance Minister Zdravko Marić and underscored that maintaining liquidity is not only relevant during the lockdown period but should be extended for a longer period, and that recovery can only be possible if investments are boosted.

HUP proposes that jobkeeping measures be extended even after busines restrictions are lifted until such time that  all enterprises generate at least 90% of their pre-pandemic revenue in 2019. HUP believes that abolishing support measures for the economy should be gradual, depending on the epidemiological situation, but also on the circumstances in each individual sector so that Croatia is not faced with a wave of bankruptcies and layoffs.

HUP also calls for a portion of fixed costs to continue to be covered, taking account of the percentage revenue has decreased, and for facilitating access to loans for liquidity and working capital, including guarantee schemes for micro, small and medium-sized enterprises.

HUP advocates possibly transforming a portion of loans into grants and for the moratorium on loan maturities to be extended for existing loans, along with state guarantees, at least until the end of this year and longer if need be, based on transparent criteria.

HUP proposes additional support loans for exporters and enterprises investing in the 4.0 industry, and support for investments by large companies through increased support for EU co-funded projects.

It also recommends the possibility of deleveraging debts between companies to prevent a chain reaction, and for non-recoverable loans to be identified faster, as well as speeding up bankruptcy procedures, and introducing additional tax cuts.

"We believe that government subsidies to cover the disrupted economic activities due to the COVID crisis should continue until such time that enterprises can do business normally and save jobs without that support," HUP said.

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ZAGREB, 29 April (Hina) - The Croatian government expects the national economy to rise at a rate of 5.2% in 2021, which is 0.3 percentage points more than its previous forecast, the government said at its meeting on Thursday when it adopted the 2022-2024 Convergence Programme.

Economic activity is expected to pick up at a rate of 6.6% in 2022.

The Convergence Programme is a document that is adopted on a regular basis in dialogue with the European Union's institutions as part of the European semester.

This year's document also deals with macroeconomic, fiscal and other economic effects of the draft National Recovery and Resilience Plan (NPOO), which was forwarded today to the European Commission for final fine-tuning.

Addressing the meeting, Finance Minister Zdravko Marić said that the effects of the NPOO raised the projected growth rate by 0.3 percentage points. Furthermore, growth of 6.6% and 4.1% is forecast for 2022 and 2023 respectively,

The finance minister said that these rates have 1.5 percentage points of the effects made by the National Recovery and Resilience Plan.

In 2024 the economy is expected to rise at a rate of 3.4%.

Marić pointed out growing commodity and services exports as a positive contribution to the growth.

Domestic consumption and investments will also give tailwinds to the growth.

2021 budget gap at 3.8% to narrow in coming years

The projections from the Convergence Programme, including the fiscal elements, will serve as an input in the preparation of the budget revision, the minister said.

Concerning the expenditure side, the minister pointed out the costs incurred due to the COVID-19 epidemic, which have reached HRK 32 billion.

He said that in 2020, HRK 14.1 billion was used to offset the pandemic and an additional 8.6 billion this year. Of that amount, the  largest portion was used for the job retention scheme, including grants for job-keeping measures, shortened working hours, and the coverage of the fixed costs of enterprises.

In the healthcare system, the COVID-related costs covered the procurement of coronavirus tests and now vaccine supplies, Marić added

Therefore, the initial plan of this year's budget gap of 2.9% has widened to 3.8% of GDP, the minister explained.

In 2022, the budget gap should be within the limits set by the Maastricht criteria (-2.6%), and in 2023 it would narrow to 1.9% and further to 1.5% in 2024, according to the minister's explanation.

Marić recalled that Croatia had left the excessive deficit procedure in 2017 and was no longer in the group of countries with excessive economic imbalances, regaining the status of a creditworthy country. He also underscored Croatia's aspirations to adopt the euro.

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April 24, 2021 - Finance Minister Zdravko Marić said on Saturday that the National Recovery and Resilience Plan (NPOO) was the topic of the government's meeting earlier in the day, was a generational opportunity for Croatia.

The government is expected to endorse the plan on Thursday.

"We are going to finalize and hammer out this document at the government's session on Thursday, and we will very likely adopt the final draft of the plan which we will forward to to the European Commission for fine-tuning and evaluating," Marić told the press after today's meeting of the inner cabinet.

The procedure of evaluation and assessment of national recovery plans from Croatia and other EU member-states will take several months in Brussels, according to the minister.

Marić recalled that Croatia's national plan is about 10 billion euros, and two-thirds (6.3 billion) refer to grants. After that, the following stages are about loans for 3.6 billion euros.

Furthermore, the Multiannual Financial Framework for Croatia envisages 12 billion euros, and also there is the Solidarity Fund. All those are great financial amounts in the next few years, the minister said.

The deadline for applying projects under the recovery plan in mid-2026 and tapping funds can be until the end of that year.

The approval in Brussels would pave the way for the disbursement of a 13% pre-financing, which is about 800 million euros. After that, the amounts will be allocated to Croatia twice a year based on the fulfillment of the criteria as agreed with European institutions, Marić said.

Asked by the press about the engagement of the private sector, Marić said that the first component of the Croatian NPOO plan is about the enterprise sector, making up 50%. He added the combination of the private and public institutions pertaining to education, healthcare, public administration, judiciary, pension system, social policy, and initiatives for the post-earthquake recovery.

The direct effect concerning the private sector is 34%, and also, any investments have implications for the private sector, he said.

Croatia one of the few EU members where the plan was to public consultation

Marić dismissed criticism about a lack of transparency when it came to the document. He said that Croatia was one of the few EU member-states to have this document put to public consultation. Social partners were provided with an insight into the draft document, and a plenary session of the parliament discussed the matter.

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ZAGREB, 14 April, 2021 - Health Minister Vili Beroš said on Wednesday that the government and representatives of drug wholesalers had reached agreement on a debt settlement scheme.

The issue of the debt made the wholesalers restrict and defer the deliveries of medicines to hospitals in late March.

"Today's meeting is one more step towards the debt settlement," Minister Beroš said adding that only together the two sides could solve this decades-long issue which became exacerbated during the COVID-19 pandemic.

Finance Minister Zdravko Marić outlined the elements of the scheme.

In the next three months we will transfer some funds to the Croatian Agency for Health Insurance (HZZO), and the Health Ministry so as to enable the cash flow in those institutions and enable them to pay liabilities towards wholesalers and providers, Marić said adding that those funds would be ensured through the redirection and reallocation of outlays in the state budget.

The monthly allocation for hospitals will be HRK 600 million and an additional 300 million for pharmacies.

In June, the government is likely to conduct a budget revision whereby an additional cash inflow for hospitals and pharmacies will be ensured so that debt deferment period lasts no longer than 180 days for hospitals and 120 days for pharmacies.

In June alone, 135 million kuna will be directed to pharmacies and HRK 760 million to hospitals, with the plan to respect the deferment periods in the remainder of the year.

Marić hopes that this scheme will remove any need for any new meeting with wholesalers on the debt.

The finance minister also expects reform efforts in preventing any  further accumulation of liabilities and in this context he mentioned the plan to cut the deferment period to 60 days.

The wholesalers' representative Diana Percač thanked the ministers for efforts to provide funds to cover the debt.

She also pledged the continuation of the delivery of drugs to pharmacies until the end of this year.

(€1 = HRK 7.571658)

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April the 7th, 2021 - As the pandemic continues to throw proverbial spanners in the works of all things imaginable, the economy is counting the kuna and the Croatian Finance Minister, Zdravko Maric, is busy cooking the books.

As Poslovni Dnevnik/Jadranka Dozan writes, the latest increase in indications for coronavirus infection is passing, at least for now, without any new significant tightening up of any epidemiological measures, but how do things stand when it comes to state aid, taxes, pensions and contributions?

There are also very big question marks hanging over the head of the upcoming 2021 tourist season, as well as the overall economic trends this year. Things are a bit different than they seemed just a few months ago, ie, back at the time of making macroeconomic projections on which the Croatian Government based its budget plans.

After the end of the first quarter, Croatian taxes and contributions to the state budget flowed in at only slightly less amount than they did last year, with the impact of the pandemic on the budget hitting only mildly in the first quarter.

This weekend, Croatian Finance Minister Zdravko Maric revealed to Vecernji list that revenues from Croatian taxes and contributions in the first three months of this year were 2.6 percent lower than they were last year, with those from pension contributions falling less than tax thanks to job preservation grants from the state.

According to the Croatian Finance Minister and his Ministry, in the first quarter, around 17.5 billion kuna in Croatian taxes were collected, or approximately half a billion kuna (540 million kuna) less than last year, while pension contributions amounted to less than 5.9 billion kuna or about 90 million kuna less.

The most generous tax revenue, that of VAT, in the first quarter of the year turned out to be 3.2 percent less generous than it was last year.

This means that a little more than 11.7 billion kuna or 390 million kuna less was collected than back during the first three months of 2020, but it should be borne in mind that the real impact of the coronavirus crisis manifested itself only during the months of April and May.

Overall, year-on-year comparisons of current budget revenues don't give all that much away about where the budget is now when compared to this year's projections, although with the current epidemiological situation, plans to return the fiscal deficit to three percent of GDP in 2021 look quite optimistic indeed.

The impact of the “prolonged” coronavirus crisis is also possible on the expenditure side (higher costs in the healthcare system, higher than planned subsidies to the economy), as well as on the realisation of all planned revenue recovery.

For this year, for example, VAT revenues are planned in the amount of 53.7 billion kuna, which is a significant increase when compared to last year. In the last 11 months, this tax brought in 43.2 billion kuna to the budget, which was better than the dynamics envisaged in the rebalance (the plan for the whole of 2020 was 43.8 billion kuna), but this year's plan still implies double-digit percentage growth in terms of income from that tax.

Total tax revenues are planned for this year at 79.5 billion kuna, which compared to last year's realisation (and a month before the end of the year it was 67 billion) would also mean an increase of 5-6 billion kuna.

The budget plan envisages collecting 24.6 billion kuna from pension contributions, which means almost 2 billion kuna more than last year, but also around 700 million kuna more than in the pre-pandemic normality of a now very distant seeming 2019.

On the other hand, for example, when it comes to pension payments, which amounted to 42.2 billion kuna last year, this year, due to indexation and an increase in the number of beneficiaries, an increase in these expenditures by 870 million kuna is now expected.

Things are very far from the ‘old normal’ as we once knew it...

Regarding the risks of achieving macroeconomic and fiscal projections, ie pressures on public finances, the Croatian Finance Minister emphasised, among other things, that in relation to the time of making these projections and plans, we had yet another terrible earthquake in Croatia.

He noted that the budget has been put in the function of healthcare and the preservation of jobs, but that this doesn't exclude any responsible conduct of fiscal policy. Although this is often contextualised today with plans related to Croatia's Eurozone entry, the competent minister will say that this is even more important for ensuring healthy and sustainable growth.

When it comes to the state of public finances, of course, it will be very important to see what extent the ongoing coronavirus pandemic can be controlled, there is special emphasis in this regard placed on the issue of the pace of vaccination, as this alone will enable a "relatively solid" tourist season.

In addition, it remains to be noted that the relaxation of epidemiological measures from the beginning of March has left its mark on the fiscalised turnover of enterprises and other companies whose operations are more exposed to the epidemiological framework and have faced work bans.

The blossoming Croatian IT sector is doing better than it did during pre-crisis 2019

The recorded turnover of cafes and restaurants in March amounted to almost 528 million kuna, while in March last year, marked by the first mass lockdown of the economy, those in the catering and hospitality industry issued invoices/receipts worth 485 million kuna.

How far their activity now is from the "old normal" is somewhat indicated by the data on more than 900 million kuna of reported turnover in the same month last year. The same is true for the data on fiscalisation in so-called cash transactions in the provision of accommodation or, for example, transport.

Companies operating in the transport sector issued invoices in the amount of 138 million kuna, which is significantly more than the 117 million kuna recorded from last March, but still a quarter less than in the comparable period of the pre-crisis 2019.

Hyper and supermarkets make up the most significant financial indicators of all, as their turnover for the month of March 2021 exceeded four billion kuna, which is half a billion kuna more than last year, and as much as 900 million kuna more than back in March 2019.

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ZAGREB, 30 March, 2021 - Prime Minister Andrej Plenković said on Tuesday that Finance Minister Zdravko Marić and Health Minister Vili Beroš would meet with drug wholesalers over the debt for drugs and that a certain amount would be paid in the days ahead.

Representatives of drug wholesalers, pharmacists and drug manufacturers warned last week that the supply of medicines could be restricted due to the HRK 6.5 billion debt, and the Medika company today suspended deliveries to hospitals.

Visiting Osijek-Baranja County, Plenković told press this was a usual situation. "Every once in a while, when an important date is due, whether Christmas, Easter or election day, wholesale drug suppliers unanimously start asking for the money they are due."

"We'll talk about it, the ministers of finance and health will meet with them and certain funds will be paid in the days ahead."

Asked about the payment date, Plenković said the ministers would discuss it. "I'm not an accountant to talk with them about the exact payment date."

The CEO of Oktalpharma, Ivan Klobučar, supported Medika's move, telling N1 television that the government, the Health Ministry, the Croatian Health Insurance Fund and Minister Beroš had been ignoring their appeals for a meeting for three months.

He said the situation was such that those responsible would see how difficult the situation was when "patients and others who are not at fault at all bear the brunt." If someone urgently needs a medicine, they will not get it, he added.

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ZAGREB, 4 March, 2021 - During a cabinet meeting on Thursday, the government adopted a state aid scheme for this year for exceptionally vulnerable sectors in agriculture, ensuring HRK 121 million for that purpose.

Agriculture Minister Marija Vučković said that HRK 51 million was earmarked for dairy cows, HRK 18.5 million for reproductive sows, HRK 42 million for tobacco production, HRK 8.5 million for the olive oil sector and HRK 1 million for domesticated and native agricultural plants.

The total amount of HRK 121 million will come from the ministry's state budget allocation and from projections for 2022 and 2023, Vučković said.

The programme is aimed at improving these vulnerable sectors.

Legislative framework by year's end for euro coins with national side

The government tasked the Finance Ministry with preparing, by the end of the year in cooperation with the Croatian National Bank (HNB), a bill and other necessary acts designating the Ministry as the competent authority for issuing euro coins. These laws will also lay down the procedure for issuing, manufacturing, security, storage, management, supply, replacement, withdrawal and destruction of euro coins.

Currently, HNB has the exclusive right to issue kuna coins, and after adopting the euro currency, Croatia will follow the example of the majority of euro area countries where coins are issued by the relevant ministry.

Finance Minister Zdravko Marić recalled that last year the government had adopted the National Plan to replace the Croatian kuna with the euro and the issuance of coins is one of the significant activities in that process.

The government also endorsed the activities of the Croatian Mint in designing euro coins with the national side, Marić said.

The coins will have to be approved by the European Commission after meeting all the criteria. Marić added that the ministry will also have to arrange possible models of the business relationship with the Croatian Mint before the end of the year.