State-Owned Companies’ Profits to Fill the State Budget

By 17 May 2016

The Finance Ministry has found another way to lower the deficit in the state budget.

In order to patch budget holes, the government has decided to squeeze profitable state-owned companies. Most of the profit-making state-owned companies will have to pay into the budget 60 percent of their last year's net profits, while for example Alan Agency, which specializes in trade of weapons and military equipment, will have to pay in its entire profits, reports on May 17, 2016.

The government's decision applies to companies of strategic and special interest in which the state is the majority owner. In those companies in which the government holds a minority stake, its representatives in governing bodies will have an obligation to require that the same share of profits is also paid into the budget.

Only five state-owned companies have been exempted from this rule: Croatian Motorways (HAC), Croatian Roads (HC), Croatian Air Traffic Control, Plinacro and the Dubrovnik Airport.

Given that a significant number of state-owned companies has not yet released data on their business operations in the last year, it is currently impossible to accurately determine how much money will end up in the budget. At this moment, data are available for seven companies listed on the Zagreb Stock Exchange and two additional companies (Croatian Lottery, Croatian Railways – Infrastructure) that have published their preliminary data for 2015.

The nine companies should fill the budget with about 1.4 billion kuna. According to rough estimates, all state-owned profit-making companies (including those companies in which the state has a minority share) should pay into the state budget almost two billion kuna.

Interestingly, the budget revenues plan for this year provides for only 832 million kuna of income from financial assets, which means that the government wants to at least twice exceed the plan.

The lion's share of profits should come from Hrvatska Elektroprivreda (HEP), which last year had a profit of 1.94 billion kuna. Since the state is the sole owner of HEP, the budget will get a full 60 percent of profits, or about 1.16 billion kuna.

Among companies that have not yet announced their business results for the last year, the state budget can expect to get most from Alan Agency. If it were to repeat results from 2014, the state-owned company which has a monopoly over trade in arms and military equipment, the budget would receive about 80 million kuna. According to Finance Minister Zdravko Marić, these funds would be used strictly for modernization of armed forces.

Due to losses in the last year, the state will probably not get anything from companies such as INA, Đuro Đaković, Petrokemija, Croatian Railways – Cargo and Croatian Railways – Passenger Transport.