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Croatia tax revenues down 43.2 percent

Christian Fernsby |
Croatian government sent to the parliament a draft 2020 budget revision which reduces revenues by 23.2 billion kunas ($3.319 billion) to almost 122 billion kunas ($17,453 billion) and keeps expenditures at 147.3 billion kunas ($21.072 billion).

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Topics: CROATIA    TAX   

Under the revised budget, revenues are planned at 121.95 billion kunas ($17.443 billion), down from the originally planned 145.1 billion kunas ($20.754 billion). This decline is a result of bailout measures in dealing with the coronavirus and of the economic downturn.

Until the end of March, the revenues side showed no or little effects of the coronavirus crisis and that the fall was felt in mid-April. In the first two weeks, VAT revenues not only decreased but were negative.

The situation improved by the end of the month and April saw a 43.2% annual drop of tax revenues, while contributions dropped by 20%.

The strongest message of the revised budget was keeping expenditures at HRK 147.3 billion despite an unplanned HRK 7 billion for keeping jobs and millions in additional expenses for healthcare.

Prime Minister Andrej Plenkovic said at a government session on Thursday that the revision resulted from unusual circumstances that no one had foreseen or wanted.

"The rebalancing we are proposing is necessary to secure state funding," Plenkovic said, adding that the government will take necessary steps in the financial markets to offset the revenue shortfall.

"So, for a long, long time, we emphasize that we started to change the structure of imports and we started to change the structure of exports. Thus, there is no longer dominance of the imported components of those products that have dominated for the past 5 or 6 years.

"So, based on the Structural Funds, the new know-how technology is being imported, and with that we have already come up with the opportunity or a delay of 3 or 5 years where we slowly started to put that new technology into its full purpose, thus a different export structure began to occur," said Darko Horvat, the Minister of Economy, Entrepreneurship and Crafts, in an interview for the TV show Tema dana on February 28.

"What I'm saying all the time is 12% growth in investment, 18.7% growth in R&D investment are slowly coming to that that Croatia has begun to understand the intention of Europe as a whole, that the innovation and R&D are starting to take on a lot of momentum and only investments in those segments can give added value to both our exports and our production primarily to our manufacturing industry.

"At the moment, what is the fact, therefore, the volume of industrial production was growing in 2019, after 5 or 6 years, we were able to stop those negative trends.

"Admittedly, the growth of industrial production at the level of 0.5% is not a big step up, but by stopping all negative rhetoric we have been talking about for the last 5, 6 years, gives hope that in 2020 and 2021 , and especially the new financial perspective which will invest more than 35% of the overall European budget in a smart Europe, and thus Croatia gets a large part of that cake, the perspective is that innovation, new industries, industries 4.0., must start happening also in Croatia as well, and thus, the structure of imports and the structure of exports will change much, much more quickly," said Horvat.

The European Commission predicts Croatia a 9.1% drop in GDP this year. Croatia's recovery should also begin next year, when GDP should grow by 7.5% annually.

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