Prime Minister’s Salary to Increase by Thousands Thanks to Tax Changes

By 26 September 2018

ZAGREB, September 26, 2018 - Finance Minister Zdravko Marić said on Wednesday that the government's tax changes would reduce, over a period of three years, the tax burden on citizens and businesses in the amount of some 6.3 billion kuna, and that given that there was no tax change that could increase the net income for citizens with below-average wages, he was proposing expanding the scope of products to be taxed by a lower, 13% VAT rate.

While arriving for a session of the inner cabinet, Marić was asked by reporters to comment on the fact that under the tax reform to be discussed by the parliament, the highest salaries would increase the most, which would mean, for example, that the prime minister's salary would increase by around 4,000 kuna over two years.

"The planned tax changes will reduce the tax burden on all citizens and businesses by around 6.3 billion kuna over a three-year period. I hope that these items will be put on the parliament's agenda today. It is not true that we have not taken into account proposals regarding the tax reform. One in three proposals have been accepted and built into the amendments," Marić told reporters.

The parliament is expected to put on its agenda today the government's latest tax reform proposal, which is a set of amendments to nine tax-related laws. Among them are amendments to the VAT Act, which envisage expanding the lower, 13% VAT rate to include, as of 2019, nappies, live animals, meat, fish and crabs, shellfish and other sea invertebrates, vegetables, fruit and nuts, and eggs, as well as a reduction of the standard, 25% VAT rate to 24% as of 2020.

The tax reform set also includes amendments to the Real Estate Transactions Act, the Profit Tax Act and the Income Tax Act, the General Tax Act, etc.

This is the third round of tax and administrative breaks in a tax reform launched in 2017.

Asked to comment on the fact that lower salaries will go up by 20-80 kuna while some will go up by 1,000 kuna, Marić said that calculations about how much salaries would grow were not entirely correct because the Income Tax Act did not define one's salary amount but rather how much their gross salary was taxed, and that one should ask oneself how many people paid taxes.

"If you are not subject to income tax because you have a below-average salary or have more dependents, there is no tax change that can directly increase your net income. But that is why this third round of tax changes puts emphasis on that. Food accounts for the largest part of spending of people with below-average salaries and that is why we are reducing VAT on some foods," said Marić.

Public Administration Minister Lovro Kuščević said, upon arriving for the meeting of the inner cabinet, that Minister Marić had done a good job with regard to the tax reform and that the coalition partners had supported the tax reform.