November 26, 2012 / 12:41 PM / 5 years ago

Croatia government divided over property tax

ZAGREB, Nov 26 (Reuters) - One of the main parties in Croatia’s coalition government is resisting plans for a property tax that its partners say would smooth investment when the country joins the European Union next year.

The tax, proposed by the Social Democrat party and announced last Friday, would replace fees that citizens and firms have to pay currently for maintaining and developing local infrastructure.

But the Croatian People’s Party (HNS), the other major coalition partner, challenged the tax plan on Monday, saying it was the wrong time to make the move.

“It would be rational not to make that move right now. No one who is mulling an investment wants any additional burden,” Vesna Pusic, the HNS’s most senior cabinet member, said on Monday.

Pusic is Deputy Prime Minister and Foreign Minister.

Finance Minister Slavko Linic, a Social Democrat, announced last Friday that the new property tax was intended to take effect on April 1, 2013. He said it should not increase the overall tax burden because the government would also ease the tax burden on employment.

“We should further discuss this issue, but our position is that this is not a right moment for such a tax,” Pusic said.

Croatia’s President, Ivo Josipovic, said that disagreement between the key coalition partners meant “a serious crisis in the government”, but Pusic played it down.

“This is not a crisis of the ruling coalition. I talked to (Prime Minister) Milanovic about this issue and we will keep on talking to find a solution,” she said.

Croatia, due to join the EU next July, is likely to suffer a fourth recession year in a row in 2012. The government hopes to achieve growth of 1.7 percent next year by encouraging investment in both the public and private sectors.

Reform plans include budget consolidation, making public administration and judicial procedures more efficient, cutting labour costs and speeding up the granting of various licences.

The centre-left government is led by the Social Democrat Prime Minister Zoran Milanovic. (Reporting by Igor Ilic; Editing by Ruth Pitchford)

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