There are a number of extremely high-quality projects that will make this possible, and we must not neglect the continuation of their implementation.
By assuming the position of Minister of Economy and Sustainable Development, I accepted the job of managing a huge department with many segments and mini-departments, and I used the last month to familiarize myself in detail with all the important completed projects, as well as ongoing or planned projects, Minister of Economy and Sustainable Development Damir Habijan tells Diplomacy&Commerce. The Minister speaks in detail also about the most important projects from his department, and about the implementation of all the plans of the Government of the Republic of Croatia.
- You recently came to the head of a Ministry on which the very quality of daily life of Croatian citizens depends in many ways. What would you single out as the priorities in your activities in the coming period and what do you see as the biggest challenges in their implementation?
I would particularly like to single out the Action Plan for reduction of non-tax and parafiscal charges, which was adopted by the Government of the Republic of Croatia at the end of December last year. This is an extremely important Action Plan for businessmen in terms of reducing non-tax and parafiscal charges in the amount of 132.7 million euros. Amendments to regulations and the legal framework will achieve a reduction in fees for the use of public benefit forest functions, a reduction in the court fee when submitting a proposal for entry into the land register electronically, a successive reduction in the fee for managing mandatory pension funds, a reduction in the fee for water use, and a reduction in the fee for water protection and numerous other reductions. I am convinced that this is good news for businessmen and citizens equally. The Action Plan was reached in agreement with several departments, and I thank them for their cooperation. Also, I should mention the action plan concerning administrative relief of at least 265 million euros, which is aimed at several key areas: taxation, tourism, agriculture, transport, as well as services within the Ministry of Economy and Sustainable Development. These activities are a clear indication of the consistent policies of the Government of the Republic of Croatia when it comes to creating and maintaining a favourable entrepreneurial climate. Furthermore, there is a large number of activities related to the water utility area, and a special focus has been placed on energy due to geopolitical events over the last two years. Active efforts are being made to strengthen energy security, which includes renewable energy sources, exploitation of geothermal potentials, decarbonisation and general promotion of renewable energy sources. Some of the projects are already in the implementation phase, some are still in pilot stage. This is only part of the projects that the Ministry is actively implementing. There are series of challenges that await us, and everyone is well aware of how and to what extent the aggression against Ukraine has affected global economies. We follow geopolitical events, we adapt to them, all with the aim of strengthening the competitiveness of our economy and raising the citizens’ standards.
- How much can the parliamentary elections that are expected to take place this year slow down or maybe even speed up the implementation of the set plans?
I am not thinking about the term of office, nor the date of parliamentary elections. I consider it essential to continue with continuous work, regardless of the date of parliamentary elections. The obligation of the state, including the Ministry, is to ensure a positive climate for the development of the economy, while caring for citizens and strengthening their standards. There are a number of extremely high-quality projects that will make this possible, and we must not neglect the continuation of their implementation.
- You recently met with representatives of several professional associations, one of which is HUP. One of the topics was the tax burden. The conversation was also about pricing policy and challenges in the energy sector, the wood industry, the labour and capital markets, and other current topics. Do we have any concrete decisions regarding the aforementioned taxes, the labour market..?
Tax Administration of the Ministry of Finance has published the Tax Competitiveness Portal of the Republic of Croatia in comparison with other European countries, from which it is evident that the labour tax burden in Croatia is one of the lowest in the European Union, and Croatia is a desirable destination for business establishment. According to the share of tax revenues in GDP, Croatia was at around 36 percent in 2021, while the EU average was around 41 percent. In addition to the fact that this share is currently lower in the Republic of Croatia, the share continues to decrease, in contrast to individual EU countries. Regarding the taxation of investment income, it is important to point out that the lower tax rate (10 percent) is paid by 91 percent of taxpayers.
The aim of the tax policy in the Republic of Croatia will be to shift the tax burden from labour to property and to reduce the tax burden on higher salaries in order to attract as many high-paid jobs as possible.
- These days, the demands of craftsmen, especially those who pay flat-rate taxes, are getting louder and more frequent, considering the introduction of the euro and inflation, to raise the allowed limit of annual income from the current limit which is slightly below 40,000 euros to 50,000 euros or even 80 000 euros like in some EU countries. Is there such a possibility in Croatia and what can the Flat-rate Taxpayers expect, so that a large number of them would not enter the VAT system, and therefore increase the price of their services and problems in business operations?
The threshold for entering the VAT system in Croatia is higher than the EU average, for example, in Austria it is EUR 30,000.00, in Belgium and Bulgaria EUR 25,000.00, in the Czech Republic (as well as in Croatia) EUR 39,000, in Germany EUR 17,500.00. euros, in Estonia 40,000.00 euros, in Greece 10,000.00 euros, in Spain and the Netherlands it does not exist, it is 65,000.00 euros in Italy, 45,000.00 euros in Lithuania, 40,000.00 euros in Latvia, 30,000.00 EUR in Luxembourg, EUR 35,000.00 in Malta, EUR 47,000.00 in Poland and Romania, EUR 29,000.00 in Sweden, EUR 50,000.00 in Slovenia and Slovakia, therefore Croatia is in the middle.
- If you had to single out one thing that you have done since you came to the head of the Ministry, that are you most proud of – what would it be?
I have been in the position of Minister of Economy and Sustainable Development for a very short time, but if I had to single out some of the successes of the Ministry, I would certainly mention the continuous implementation of the policy of the Government of the Republic of Croatia aimed at relieving entrepreneurship through the reduction of non-tax and parafiscal charges and through the optimization and digitization of services provided by the state to entrepreneurs, which I already mentioned at the very beginning.
We marked the completion of the first phase of construction of the new, second Croatian underground gas storage facility in Grubišno Polje and put into operation the newly built gas station of the future PSP Grubišno Polje. This visionary move by the Government of the Republic of Croatia, which financed the project together with the European Commission, ensured the stability of supply in the Republic of Croatia over the last two years, when it comes to natural gas. In combination with the measures adopted by the Government regarding limiting energy prices, all postulates of the European Union were ensured, and energy products were delivered to citizens and the economy of the Republic of Croatia in sufficient quantities and at affordable prices.
I would also like to point out the adoption of the Decision of the Croatian Government on increasing the security of gas supply by building the Bosiljevo-Sisak-Kozarac gas pipeline and the Lučko-Zabok gas pipeline of a total value of 400 million euros, which will ensure a safe and stable gas supply,
When it comes to nature protection, I would like to highlight intensive activities aimed at the protection of Ivanščica, Strahinjčica, Maceljska Gora and Ravna Gora in the nature park category. During January, working meetings were held with the Varaždin and Krapina-Zagorje counties, and an agreement was reached on the general coverage of the future park with an area of over 31,000. We are talking about an area that is a characteristic mix of mountain forests, grasslands, vineyards, orchards and gardens that are home to numerous plant and animal species, and is also notable for its valuable geological and paleontological sites, the most famous of which is the unique Vindija cave. Let’s mention that springs of three rivers are located in the park: Sutla, Bednja and Lonja.
There is a whole number of projects and activities that were initiated before I assumed the position of Minister of Economy and Sustainable Development, and they need to be successfully concluded. They cover all areas of the Ministry’s competence and each of them brings a certain value to the economy, encouraging entrepreneurs, strengthening competitiveness, energy stability, combating climate change, and improving communal infrastructure.
- Energy, gas, gas storage, fuel prices – these are global topics, especially now in times of crises and wars. How do you see Croatia’s position in this context?
In recent years, the Republic of Croatia has been actively working on diversification of sources, security of supply, and decarbonization of the energy sector. The LNG terminal on the island of Krk started operating at the beginning of 2021, and already in 2022, due to the energy crisis caused by the aggression of the Russian Federation towards Ukraine, the Government of the Republic of Croatia made a decision to increase the capacity of the LNG terminal and the gas pipeline Zlobin – Bosiljevo. Furthermore, we included these projects, as well as projects intended to increase the gas pipeline on the Bosiljevo – Sisak – Kozarac and Lučko – Zabok routes, in the REPowerEU chapter of our Recovery and Resilience Plan, which sent a clear signal to neighbouring countries that the Republic of Croatia is an important factor in the security of gas supply from third countries. The planned capacity increase will be completed by the end of 2026, when the plan is to make the increased capacity available to Hungary and Slovenia, and through them to other EU members. Works on the new gas storage facility, which is primarily intended to ensure peak gas consumption within the Republic of Croatia, have also been opened, and this will increase and optimize our gas transportation system.
At the same time, we ensure support for our citizens in the form of subsidies which, as short-term measures, will reduce the pressure on individuals, until medium-term solutions are built and until the return of market principles to the energy sector at the EU level is enabled.
All of the above clearly shows that the Republic of Croatia is ready for these challenges and that it will continue to work on ensuring safe and affordable energy, making sure to continue to work on ensuring sufficient amounts of energy from various parts of the world.
- In this issue of our magazine, we did an interview with the Ambassador of Belgium H.E. William De Baets, among others. You recently met with the Minister of Energy of the Kingdom of Belgium, Tinne Van der Straeten. The main topics of the meeting were related to energy transition, i.e. the production and transmission of green energy, and nuclear energy. What specifically can we learn and apply from the Belgians here in Croatia and are there any concrete agreements?
Croatia and Belgium support common EU policy. Energy transition is an important segment of the decarbonization policy, which must ensure that Europe becomes the first climate-neutral continent by 2050. In accordance with this, we in Croatia are trying to strengthen the production of energy from renewable sources, especially because the potential we have from wind and sun is great, and to that we need to add geothermal energy, as well as bio-economy. Considering our co-ownership in Krško Nuclear Power Plant, we also strongly support nuclear energy, especially research that should lead us to the commercial use of fusion.
All of the above clearly shows that the Republic of Croatia and Belgium have a lot of common points of interest and opportunities to strengthen cooperation