Thursday, 17 September 2020

Finance Minister Zdravko Maric Reveals Plans to Abolish Unpopular Tax

September the 17th, 2020 - We recently reported on the fact that the much anticipated abolition of an extremely unpopular tax had been reconsidered by Finance Minister Zdravko Maric, who explained that those who believed the change was due to come into force at the beginning of 2021 had got their wires crossed.

As Poslovni Dnevnik writes on the 16th of September, 2020, Finance Minister Zdravko Maric said on Wednesday that the abolition of property transfer/sales tax is indeed planned during this government's term, and that it has never been specified that this will happen on the first day of next year, which is something that people have somehow begun to believe.

As Finance Minister Zdravko Maric told reporters recently, there is no "rethinking" on this issue because "the Government never said that it would come into force on January the 1st, 2021", but its programme does state that this government plans to abolish the unpopular tax during its mandate, but without any sort of specified time period, much less a specific date.

''Property transfer/sales tax, value added tax and food tax, these are all measures that we also put in the programme, but we didn't define when, ie, when during the mandate we'd get rid of them,'' explained Maric.

The property transfer/sale tax amounts to three percent of the market value of the purchased piece of real estate, this tax is income for cities and municipalities, and as some media portals, wrote yesterday, its abolition caused a revolt among various Croatian cities and municipalities, and finally a delay.

However, Finance Minister Zdravko Maric vehemently denies this, adding that in the current round of tax changes, the abolition of that tax was not originally envisaged.

He explained that from the first day of next year, there will be changes to income tax, ie lowering rates from 24 to 20 percent, or 36 percent down to 30 percent, as well as lowering the corporate income tax rate, from 12 to 10 percent, for all Croatian enterprises with a turnover of up to 7.5 million kuna.

In the context of a fairer distribution of the tax burden, and regardless of all previous tax changes, Maric pointed out that Croatia is still at the very top of the countries in terms of the share of VAT revenues in GDP.

Journalists also asked the Finance Minister about the postponement of the payments of leases, which was also appealed to by the employers' associations, to which Maric said that these were civil relations between private individuals and business entities. He suggested that financial institutions themselves, following the example of the Croatian Government's previous measures, should take additional measures to be accommodating towards enterprises and other clients.

Asked about the possible further prolongation of the moratorium on executions, Maric reiterated that this was down to the relationship between debtors and creditors, and that the state, for its part, had extended the deadline for another three months.

''We need to think and talk not only about the rights of debtors but also about the rights of creditors. But the creditors, who have these opportunities, should certainly follow the example of what we as a state have done, to enable some kind of repayment, or installment payment, or some other mechanisms that will make it easier to avoid great pressure in a short period of time,'' stated Finance Minister Zdravko Maric.

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Wednesday, 16 September 2020

Finance Minister Maric Changes Mind on Property Transfer Tax Abolition

September the 16th, 2020 - The noise surrounding property tax and property/real estate transfer tax has been loud for a significant amount of time now. There have been comments made across all spectrums and it appears that the subject continue to be a thorn in the side of many, constantly coming up in almost every political discussion. It appears that what was once celebrated, the idea of the total abolition of property transfer tax, isn't going to happen any time soon as Finance Minister Maric changes his mind.

As Poslovni Dnevnik writes on the 15th of September, 2020, back in July, Finance Minister Maric announced that he planned to abolish the ever-unpopular property transfer tax, but cities and municipalities rebelled, so the tax will remain throughout next year. This unfortunately means that the proverbial little guy suffered once again as buyers of apartments and houses now realise that they waited in vain for the abolition of this cumbersome tax.

Those who postponed the purchase of property for next year in order to not have to pay three percent real estate transfer tax, are more than understandably irritated by Finance Minister Maric's apparently sudden change of heart.

As was unofficially confirmed for 24sata from a reliable source, this tax will certainly remain in place as normal throughout next year and will not be part of the package in which income tax and profit tax are being reduced.

Real estate/property transfer tax is paid according to the value of the real estate in question, so if you're buying an apartment, for example worth 100,000 euros, the city or municipality where the real estate is located should be paid 3,000 euros, this is no small amount in any scenario, much less when a buyer is already forking out a huge sum of money for a property.

''The real estate transfer tax of three percent is set to remain next year. The programme of the Croatian Government includes the announcement that it will be abolished by the end of the mandate and we're going fulfill that, but it will not be part of this relief package,'' a high-ranking interlocutor from the Croatian Government confirmed.

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Friday, 11 September 2020

FinMin Violated the Principle of Good Conduct, The Conflict of Interest Commission Says

ZAGREB, Sept 11, 2020 - The Conflict of Interest Commission found on Friday that FinMin violated the principle of good conduct by participating in a decision by the Croatian Bank for Reconstruction and Development (HBOR) to grant a loan to a company owned by his friend Josip Stojanovic Jolly.

The procedure against Maric was launched in December last year due to the possibility of bias because, in his capacity as finance minister and president of the HBOR supervisory board, he did not excuse himself from the decision to issue a loan to Stojanovic's Olympia Vodice company, which was issued with an HBOR loan for the construction of a hotel even though he had made it clear in his statements to the media that Stojanovic was a friend of his.

The commission decided on Friday that Maric was not in conflict of interest but rather that he had violated the principle of good conduct, which is not subject to any penalty.

The commission also found that Maric had not violated the law by attending a World Cup match in Russia where he was seen in Stojanovic's company, as Maric provided evidence that he personally paid for his ticket.

In a second case, the commission found that Zagreb Mayor Milan Bandic and members of parliament who crossed the floor and joined his parliamentary group had not violated the law.

The commission decided on each individual member of parliament who crossed the floor and joined Bandic's party and whether they were rewarded for that with some counter-favor. The commission found that no violation had occurred with regard to the Conflict of Interest Act.

The procedure involved Mayor Bandic and Members of Parliament Marija Puh, Mladen Madjer, Milanka Opacic, and Sinisa Varga who crossed the floor in parliament, as well as Deputy Mayor of Donja Stubica Luka Grabusic and Radoboj Mayor Andjelko Topolovec who too joined Bandic's party.

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Saturday, 29 August 2020

Finance Minister Zdravko Maric Comments on Record Croatian GDP Drop

As Poslovni Dnevnik writes on the 28th of August, 2020, the Minister of Finance, Zdravko Maric, commented on the decline in Croatian GDP in the second quarter, which amounted to 15.1 percent and is the largest decline since statistics have been recorded over the last 25 years.

"This is the biggest quarterly drop ever recorded in the Republic of Croatia, which I don't think should come as big surprise considering the coronavirus pandemic. Government spending is the only category that has recorded growth, which is expected given the circumstances and what we've done. The 14 percent drop in personal consumption is the largest drop in personal consumption ever recorded. We didn't expect such a big drop in investments,'' Zdravko Maric commented.

''Of the total investments in the Republic of Croatia at the annual level, 52 percent refers to construction, and that recorded a slight plus. We believe that the procurement of equipment led to the fact that total investments fell more than we expected them to. We also had a physical barrier regarding the procurement of equipment due to the pandemic,'' noted the Minister of Finance.

When asked whether a large number of dismissals would follow, Zdravko Maric said that no one could guarantee anything, nor can anyone really be very specific on that issue.

"Challenges remain. We all need to do everything we can to save jobs as much as is possible, that's the most important thing now. In some segments, such as construction, it can already be seen that things are getting better, while in others, such as catering and hospitality, things are more difficult,'' stated Maric.

"The decline in the second quarter is at the level of the Eurozone. When looking at individual countries, there are countries that have a higher rate of decline, Italy, Spain, Portugal… We also did an analysis with the first quarter included, and that marked a decline of 7.8 percent, concluded Zdravko Maric.

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Wednesday, 26 August 2020

FinMin: Q2 GDP Drop Expected To Be Larger Than During Financial Crisis

ZAGREB, Aug 26, 2020 - Finance Minister Zdravko Maric said on Wednesday the GDP drop in this year's second quarter was expected to be larger than the largest drop during the global financial crisis.

The national statistical office is expected to issue a report on GDP in Q2 on Friday.

Responding to questions from the press, Maric said the government would present new forecasts for the whole year in the first two weeks of September.

The largest GDP drop to date, of 8.8%, was recorded in Q1 2009, at the start of the global financial crisis.

Six analysts polled by Hina expect GDP to drop 13.9% year on year. This will be the first drop since mid-2014 and the largest since 2000.

Maric said everyone realized how much the state-supported the economy this year via job retention measures, but added that this could not be done indefinitely.

New programs are opening up, such as the EU's SURE program, from which Croatia is expected to receive €1 billion in favorable loans which will most likely be used to finance a shorter working week.

Maric said Croatia fared even better with the Next Generation EU instrument, the coronavirus recovery plan in which Croatia will have €9.4 billion at its disposal. He said the big challenge now was to draw the highest amount possible as quickly and as effectively as possible.

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Saturday, 22 August 2020

Minister Zdravko Maric Announces Cuts: Only Pensions are Safe

As Poslovni Dnevnik writes on the 21st of August, 2020, Finance Minister Zdravko Maric was a guest of Dnevnik Nova TV on which he revealed where the Croatian Government is planning cuts in order to "patch" the budget back up again, that is, which categories it will not touch.

At the beginning, the Minister of Finance, Zdravko Maric, commented on the deficit in the state treasury of 17 billion kuna when compared to last year and said that the deficit due to the coronavirus crisis is actually even bigger.

“This is a mid-year result that applies to both the period before the arrival of the coronavirus pandemic and after the fact. We'll try to see how much coronavirus is actually going to cost us. On the one hand, we have a decline in revenues, both due to the decline in economic activity and due to the anti-epidemic measures, delays and the write-offs of taxes, but increased needs on the expenditure side of the budget. We paid only six billion kuna in job preservation support. When some other measures are added to that, we're at almost 12 billion kuna, and then when we add it all up, we come to 21 billion kuna, and that's at the moment,'' explained Minister Maric, pointing out that cuts are being considered, and only pensions will be safe from them.

"Pensions will certainly not be touched, all other things are subject to our considerations," he said. He said that the government is fully aware of the situation with the crisis, but pointed out that in the past four years they have proved that they will return public finances to balance as soon as possible.

"Reforms are one of the two key levers for using funds from the European Investment Recovery Fund," he said, but Zdravko Maric was reluctant to talk about concrete cuts and reforms and avoided those issues several times.

Although it isn't possible to accurately estimate the upcoming economic downturn, he pointed out that a decline of over twenty billion kuna is unfortunately predicted. The minister also explained that part of the reason for this was the decline in fiscalisation, which declined by more than 35 percent back in April this year.

"It will be the biggest drop for sure, at least since GDP has been being monitored. We didn't have such statistics to go off back during the Homeland War, but this will certainly be the biggest drop,'' claimed Zdravko Maric.

He announced that the government is starting to reduce income tax from 36 down to 30, and from 24 down to 20 percent, and the profit tax for all those who achieved less than seven and a half million kuna in turnover will be reduced from 12 to 10 percent. As for employees, he acknowledged that the new measures wouldn't affect the salaries of those not covered by the reduction, so he appealed to employers when it comes to salary increases.

"De facto, today you can pay an additional thousand kuna a month to a worker, or even more, without needing to pay any additional taxes. Even before the coronavirus crisis hit, one of the key issues was how we were going to be able to compensate for labour shortages and how we can stimulate employers to increase employee wages. We've already said that we can only get out of this crisis if we work at it all together, as a joint force,'' he said.

He estimated that we will return to how thinga were the year before the coronavirus hit, in terms of the Croatian economic picture, only a year later than expected, so in 2022.

"It's a complex issue in which one must always refrain from commenting. We have a consultant doing his job, the process is carrying on, and when all the parameters are clear and when he sits down at the table and sees what that price is, whether the buyer is willing to buy and the seller sells, then we'll have to see, but it's complex and it's difficult go into details,'' Maric explained when discissing the complicated issue of possibility of buying INA.

Still, he admitted that all this has been going on for a long time and that it must end once and for all at some point in time.

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Sunday, 2 August 2020

Minister Maric Responds to Questions on Budget, Tax, Raising Minimum Wage

Finance Minister Maric spoke for Dnevnik HRT about the budget, the economic situation in the rapidly approaching autumn, money for Croatia from the European Union and other topics.

As Poslovni Dnevnik writes on the 1st of August, 2020, the Croatian Government projected a budget deficit of 25 billion kuna and when asked what the latest data was and whether the forecasts would be in those dimensions, Minister Maric said that Croatia had achieved practically all of its financing needs with well-known programmes, reports HRT.

"Our needs, owing to the coronavirus pandemic, have increased from 30.5 billion kuna to 64 billion kuna. In circumstances such as the ones we're currently in, we can state with satisfaction that we've fulfilled all of our obligations for financing in 2020, Minister Maric emphasised. When asked how much the interest rates were in line with the expectations, Maric said that the seven-year bonds, at 0.75 percent, were on good terms.

''The two billion euros that followed in the international financial market mark one of the highest quality bonds we've issued in the international financial market on the investor interest book itself at 1.5 percent for 11 years, and these latest data refer sto maturities of 12-14 , 5 years, and the interest rates are between 0.25 and 0.50 percent. I think that these are good conditions in the given circumstances,'' Minister Maric emphasised.

A 9.4 percent drop is forecast for this year. In a month, the Croatian Government will come out with new projections based on all the information we have. Maric said that all the measures that were put into operation from the first day were aimed at preserving liquidity and preserving jobs.

"We've amortised that first wave in an adequate way, but there are still days ahead of us and the Government will follow the epidemiological picture and continue to do everything to continue the trend of preserving jobs and to start the recovery as soon as possible," said Minister Maric.

Maric said that challenges exist and that Croatia as a country must learn to deal with them, as it did in the first wave of the pandemic. 750 billion euros from EU funds is a great chance for Croatia, but also for the entire EU economy, and it is an opportunity to make a step forward for the domestic economy, but also for society as a whole, Zdravko Maric pointed out.

"Informal and formal consultations with the Commission and other relevant bodies on the programme will start in October. In April, all countries, including Croatia, are obliged to send a National Recovery Plan and in it, among other things, define both structural reforms and investment activities that should be the key determinants of spending and absorption of the part [of the money] related to the recovery plan and resilience,'' he said.

He pointed out that the basic idea at the national level is to create the necessary preconditions for the quality implementation of several strong and recognisable projects, and also not neglect balanced regional development as one of the postulates of the Republic of Croatia.

"As far as the private economy is concerned, we want to make the most of EU funds, so that they reach those who are key drivers of our economy and investments in an adequate way, either in the form of grants or in the form of quality loans," he stressed.

When asked when the minimum wage can be expected to increase and taxes to be reduced, Minister Maric said that work would begin on that after the summer break.

"As Minister of Finance, I advocate the maximum responsibility for taxpayers, which we've done in the past four years, and return to the path of a balanced budget as soon as possible," he said, adding that in parallel there will be greater absorption from the recovery fund.

He pointed out that the details will be known in autumn.

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Thursday, 30 July 2020

FinMin: Almost Entire Amount of This Year's Financing Needs Secured

ZAGREB, July 30, 2020 - Finance Minister Zdravko Maric said on Thursday that of the HRK 63.4 billion necessary for financing this year, almost all had been secured by the summer break.

Although the financing account of HRK 63.4 billion sounded really high and there was a polemic about how to secure the money, almost all have been secured by the summer break, he said in parliament.

A general government surplus was planned for the first time for this year, in the amount of HRK 1.5 billion, but the coronavirus epidemic caused a drop in revenues and an increase in expenditures for healthcare and to help the economy, due to which the state had to borrow on the domestic and the foreign market, Maric said.

Instead of a surplus, we are planning a deficit of almost HRK 25 billion and this has affected the financing account, which amounts to HRK 63.4 billion for 2020, he added.

Maric announced that macroeconomic projections would be revised in late August and early September.

He was speaking during a debate on the ratification of three loan agreements with international financial institutions totalling almost €660 million for dealing with the COVID-19 crisis, the reconstruction of the Zagreb area after a March earthquake, and boosting public healthcare.

Two of the agreements are with the World Bank and one with the Council of Europe Development Bank.

(€1 = HRK 7.5)

Friday, 24 July 2020

Gov't Sends 3 Loan Agreements with Int'l Institutions to Parliament for Ratification

ZAGREB, July 24, 2020 - The government on Friday sent to parliament for ratification three loan agreements with international financial institutions worth €660 million to respond to the crisis caused by the COVID-19 pandemic, for post-earthquake reconstruction and for strengthening healthcare.

One agreement refers to a €275.9 million World Bank loan for crisis response and recovery support and another for a €183.9 million World Bank loan for post-earthquake reconstruction in the Zagreb area and for strengthening public health preparedness.

In early June, the government endorsed reports on negotiations on the two agreements, which were approved by the World Bank Board of Executive Directors at the end of June and signed at the beginning of this month.

Finance Minister Zdravko Maric said at a cabinet meeting that the repayment period for both loans was 14 and a half years with five years' grace and a variable interest rate tied to six-month Euribor plus 0.75% of the fixed interest margin.

The €183.9 million loan envisages the establishment of institutional and coordination capacities for planning and implementing the reconstruction of public buildings damaged in the earthquake, facilitating the restoration of key healthcare and education services after the earthquake, and improving the public health sector's preparedness for communicable diseases in the future, Maric said.

The government also sent to parliament for ratification a €200 million loan agreement from the Council of Europe Development Bank.

Maric said the repayment period was 12 years with three years' grace and a fixed interest of 0.24% or a variable interest rate based on six-month Euribor plus 0.36% of the fixed interest margin.

He said the loan would be used to reduce the contagion and effects of the pandemic and ensure the availability of medical services and supplies as well as drugs and protective equipment, among other things.

Croatian companies could receive €800m from Pan-European Guarantee Fund

The government also decided to initiate the signing of a contribution agreement with the European Investment Bank on the Pan-European Guarantee Fund in response to COVID-19.

The fund is part of the €540 million packages agreed by the European Council to help businesses, together with the SURE programme to help workers and the European Stabilisation Mechanism to help states, said Maric.

The aim of the fund is to ensure liquidity so that eligible businesses, notably SMEs, can deal with the crisis and continue to develop in the medium and long terms.

The target value of the fund is €25 billion and it is formed on the basis of member states' guarantees, while short term liquidity is ensured by the European Investment Bank. These guarantees cover losses and operating expenses, said Maric.

It is estimated that the fund will mobilise €200 billion in additional investment.

Maric said Croatia's contribution to the fund would be €106.7 million and that Croatian companies, notably SMEs, could receive €800 million from it, depending on the absorption by other member sates.

"Participation in the fund will give the economy, notably small and medium-sized enterprises which have been significantly affected by the crisis, access to additional capacities of the EIB group as part of emergency financial aid in the pandemic."

Wednesday, 22 July 2020

Wholesale Drug Suppliers Get HRK 500 Mn for Hospitals' Debt

ZAGREB, July 22, 2020 - By the end of July HRK 500 million from the treasury will be paid to hospitals to settle their debt to wholesale drug suppliers, it was agreed on Wednesday by representatives of the government and suppliers, who said this payment should keep hospitals supplied with drugs until autumn.

Government and wholesale drug suppliers' representatives met at the Health Ministry to continue negotiations on hospitals' debt to suppliers, which exceeds HRK 4.2 billion and which has prompted suppliers to say that they will stop delivering drugs and operating supplies.

Although suppliers demanded an urgent payment of HRK 1 billion to make it through the summer, today it was agreed that they would get half of that.

"This will enable us to pay for the drugs which we currently don't have and ensure their delivery until autumn," supplier representative Diana Percac said.

Finance Minister Zdravko Maric said the agreement was that his ministry would find the money and pay it from the treasury to the Croatian Health Insurance Fund by the end of this month, and that the Health Ministry would find a way to transfer the money to hospitals.

Health Minister Vili Beros said the negotiations would continue in the autumn to find a long term solution to settle the debt to wholesale drug suppliers.

(€1 = HRK 7.5)

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