SDP: Croatia Lives Off Loans, Desperately

Concerned over the impact of the financial crisis on the citizens` standard, the SDP presented their salvation mechanisms.

ZAGREB, CROATIA –

- We are facing problems and we must face them – president of the Social Democratic Party (SDP) Zoran Milanovic began a press conference on alleviating the impact of the financial crisis on the citizens` standard, as the party sees it.

First, Milanovic pointed out that the SDP has already tried to intervene in laws which will, according to them, improve the financial state of Croatia- These are laws on taxation of income and dividends, which have been in effect in the USA for years and have a rate under 15 percent, he said.

 - On one hand, we have real problems, i.e. salaries, while the rise of rates on the other. We assess that it is not enough to warn, but we must offer temporary solutions in a situation when “anaemic” economic growth is expected next year – Milanovic said.

In a reconciliatory fashion, he pointed out that the Croatian Democratic Union (HDZ) wants to help the citizens, but is doing it the wrong way.

- Croatia lives off loans, very desperately. It is time for searching on all levels – Milanovic concluded and handed over the reins to Dragica Zgrabec.

VAT rates of 10 percent – as European standards

Zgrabec started with the alterations and additions to the Law on VAT. The SDP claims that the Croatian VAT is among the highest in Europe, only Finland and Poland have the same rates as Croatia does, while all other countries have lower VAT rates, apart from Denmark and Sweden.

The SDP proposes for a line of products and services to be expanded which will include a VAT inter-rate of 10 percent, as the usual VAT rate is 22 percent in Croatia. Introducing such rates, retail sale prices of these products would be reduced by 8.94 percent. The total monthly savings on products like baby clothes, baby food, nappies and sunflower oil would be 125 kuna (approximately 17 euros).

As far as saving on energy generating products goes, the citizens would save 209 kuna per month on gas and electricity.

- If European Union countries reach for such measures, there is no reason for Croatia not to do it – Zgravec concluded.

Slavko Linic looked back on the Law on contributions, as its alterations and additions would result in increased net salaries and increased contributions for the second pension plan.

The SDP propose a redistribution of contributions for pension insurance from the first scheme plan, where the employee would take on a part of the amount, 8 percent, while the employee would still pay 7 percent of contributions. As far as the second pension plan goes, the employer`s contribution would be increased from 2 to 9 percent, while the rate for health insurance would be reduced from 15 to 7 percent.

With the argument that EU members pay for health insurance mostly from state capital, Linic stated the consequences of their proposal: a rise in salaries of 4 percent and the average net salary of 5,304 kuna would be increased to 5,528 kuna (approximately 757 euros), without labour prices going up. Interventions on the second pension plan alleviate the consequences of low pensions for future pensioners, but reducing contributions for health insurance would disburden local self-administration and income would rise on this level.

With the alterations of the two stated laws, 436 kuna would be saved per month, which is 5,235 kuna per year.

The third alteration the SDP have prepared refer to the Law on income tax. They want to exclude from taxation profit which is invested or kept for crafts. At the moment, income tax amounts to 20 percent of assets, with 7 areas of clearance.

- Investment rates must go up to alleviate the slowing down of the economy. If you invest, you will have lower tax rates – Linic said.