May 24 (SeeNews) - Croatia's government said on Wednesday that it will scrap the surtax on incomes levied by municipal governments, and increase the non-taxable income to 560 euro ($604) from 531 euro as part of a tax reform planned to enter into force from the start of next year.
The aim of the tax reform is to improve the living standard of citizens, to increase salaries, in particular the lowest ones, to increase the individuals’ purchasing power, to sustain economic growth, and increase the fiscal autonomy of the local municipalities and towns, according to a presentation published on the government’s website.
It envisages changes in nine related laws, including the personal income tax law, the law for financing of local governments, the law on individuals’ contributions, and the value added tax law.
Municipalities and towns which currently impose local surtaxes on individuals’ income ranging from zero to 18% depending on their number of citizens, will be able to make autonomous decisions on income tax rates. The threshold to apply a higher income tax rate will be increased to 50,400 euro from 47,780 euro.
Regarding pension insurance contributions, individuals with a gross monthly salary of up to 700 euro will be allowed a tax relief of 300 euro, while individuals with a gross monthly wage between 700.01 euro and 1,300 euro will be entitled to a gradual tax relief.
Central government budget revenue is expected to decrease by an estimated 437 million euro due to the planned cuts in pension insurance contributions and income tax, according to the presentation.
($ = 0.928 euro)