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Tax reform to be discussed in Croatian parliament

Xinhua, November 6, 2016 Adjust font size:

The Croatian government's tax reform proposals, as the first step to stimulate economy, was expected to be discussed in the parliament next week, local media reported on Sunday.

Croatian Prime Minister Andrej Plenkovic has said that tax reform had no alternative. It was one of the most important reforms of his government, aiming at establishing a stable, sustainable and predictable tax system.

For the income tax system, the tax rates will be reduced from 25 to 24 percent and from 40 to 36 percent.

For the people who earn less than 17,500 kuna (2,590 U.S. dollars) per month, the tax will be charged by 24 percent, while higher incomes would be taxed at the rate of 36 percent. Meanwhile,the non-taxable part of income will be increased to 3,800 kuna (563 U.S. dollars) a month.

Around 560,000 people would benefit from the increase of the non-taxable and a total of 1.5 million people in the country would not pay any income tax, according to Finance Minister Zdravko Maric.

The income tax for businesses will be reduced by 2 points, from 20 to 18 percent in general, while for farmers, craftsmen and small business with lower annual revenues, the tax rate is reduced to 12 percent.

As for the value-added tax (VAT) reform, there are different opinions. The proposed reform suggested the value-added tax for utilities sections, such as electricity supply, garbage collection and the agricultural seeds and seedlings, would be reduced to 13 percent from current 25 percent from Jan, 2017, while the VAT for caterers would increase from 13 to 25 percent.

Croatian chamber of trades and crafts has argued that the measure would impede consumption, ruin small and medium entrepreneurs who run restaurants. It warned the measure would produce a negative consequence on tourism, one of Croatia's key economic pillar.

But Maric said that the prices of some 10,000 items would be cut, once the new tax reform is introduced and that bread and milk shouldn't be more expensive.

The government hoped that the tax reform would stimulate spending, leading to the increase of domestic production and creation of employment and also improvement of the climate for doing business and investment in the country. Endit