Under the government's proposal, the 12% rate would apply to incomes of up to 2,200 kuna (previously 3,600 kuna), the 25% rate would apply to salaries ranging from 2,200 and 8,800 kuna (previously from 3,600 to 10,800 kuna), and the 40% rate would apply to salaries exceeding 8,800 kuna (previously 10,800 kuna).
According to the government's new income tax projections, salaries of up to 2,500 kuna would remain unchanged; those ranging from 2,500 to 5,556 kuna would increase by 7.84 to 80.64 kuna; salaries ranging from 5,888 to 9,344 kuna would decrease by 35.84 kuna; salaries of 10,496 kuna would fall by 153.44 kuna, while those above 10,496 kuna would be 271 kuna lower.
By increasing the non-taxable income, the government plans to increase the salaries of about 750,000 employees by 70 to 80 kuna and thus cushion the effect of expected price hikes as a result of the increased VAT rate of 25%, the government said at its meeting on Thursday.
Also, the government proposed abolishing the financial police as part of its efforts to streamline state administration, saying that their duties overlapped with those of other supervisory services. The duties of the financial police would be taken on by the Finance Ministry and the staff would be reassigned.
The government set up a commission to draft a new national security strategy. It said that a lot of things had changed in Croatia and its surroundings since the present strategy was drawn up 10 years ago, including Croatia's accession to NATO.
Croatia is about to enter the EU, so a new, modern strategy of national security should be devised, the government said.