Croatia: Government adopts HRK 21bn energy support package
Metodi Tzanov
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The government on Thursday adopted?HRK 21bn energy support package?aimed to mitigate the impact of rising energy prices on households and the economy, with PM Andrej Plenkovic underlining that the envisaged measures are aimed to protect against rising energy and food prices, and contain numerous subsidies and assistance for citizens, public and private sector. He underlined that the measures are targeted at those the most affected by the rise in prices and those who need help the most. So, in order to limit the price of electricity and thermal energy, the government is to spend HRK 5.9bn; for tax relieves and reduction of excise duties on fuel - HRK 2.8bn; for support and compensation of socially vulnerable groups of the population, including pensioners, unemployed, students - HRK 2.5bn; for energy renovation of houses and apartment buildings - HRK 988mn; for grants to entrepreneurs for energy transition - HRK 1.9bn; for loans for working capital with subsidised interest rate for companies in difficulties - HRK 3.8bn; HBOR guarantees for loans to exporters in difficulties - HRK 3.1bn.
For schools, museums, hospitals and other public institutions it will be capped at 62 EUR/mWh. For companies, prices will vary between 180 EUR/mWh or 230 EUR/mWh depending on consumption.
Energy prices cap
Households will pay EUR 59 per MWh of electricity from Oct 1 to Mar 31, 2023 if they consume up to 2,500 kWh of electricity and EUR 88 per MWh for consumption above that. This measure is to cost HRK 3.1bn.
Kindergartens, schools, colleges, retirement homes, non-governmental associations, religious communities, municipalities, cities and others are also transferred to the category of households - for them, a universal service for households is being introduced with a price of EUR 62 per MWh. The measure is to cost HRK 1bn.
In the case of entrepreneurs, those who spend less than 250,000 kWh in half a year will pay HRK 0.52 per kWh, and EUR 1.76 per kWh above that consumption. The category of large consumers who consume more than 2.5GW is also being introduced - they will pay EUR 250 per MWh in the next six months. The measure is to cost HRK 266mn.
Gas prices were already limited for households until Apr 1, 2023.
In the case of thermal energy, for 160,000 customers, the unit price for households and entrepreneurs in central and closed systems is unchanged, which means that there will be no price increase until Mar 31, 2023. The measure is to cost HRK 1.47bn. Aid measures were also introduced for those who heat with wood; the VAT rate is to be reduced to 5% from current 20% - the measure is to cost HRK 32mn.
PM Plenkovic announced that next week the government will also limit the prices of bottled gas.
Price of basic food products is also capped
The government also decided to cap the maximum price of nine essential food products. The highest retail price for edible sunflower oil per litre must not exceed HRK 15.99, and the retailer's margin calculated on the net invoice price minus all rebates and non-invoice discounts is a maximum of 5%. The highest retail price of long-lasting milk with 2.8% milk fat per litre must not exceed HRK 7.39, with a maximum profit margin of 5%. The crystal sugar must not cost more than HRK 7.99 per kilogram, with the profit margin being limited to 1%. The highest retail price for flour type T-550 smooth per kilogram must not exceed HRK 5.99, and for type T-400 sharp per kilogram must not exceed HRK 6.29 (EUR 0.83); traders' margin for both types of flour is limited to a maximum of 5%. For boneless pork shoulder, the highest price is HRK 24.99 per kilogram, as well as for pork neck with bones, and for mixed minced meat HRK 32.99 per kilogram; traders' margin is limited to a maximum of 1%. A whole chicken may not be sold for more than HRK 24.99 per kilogram, with a maximum margin of 5%. Thus, the prices will be lower by 20-33% as compared to currently.
Higher non-taxable income, pensions
As part of the government's package to combat price increases, there is also an increase in the amount of non-taxable special awards - from HRK 3,000 to HRK 5,000 per year, and rewards for work results and other forms of additional remuneration for employees from HRK 5,000 to HRK 7,500. Child allowance for children up to 15 years is raised from HRK 600 to HRK 1,000 per year, as does the in kind allowance. The non-taxable lump-sum allowances for meeting the costs of food for workers are increasing from HRK 5,000 to HRK 6,000 per year, and fees for using a private car for official purposes are increasing from HRK 2 per kilometre to HRK 3 per kilometre. The tax-free severance pay when retiring increases from HRK 8,000 to HRK 10,000. The measure is to cost HRK 580mn.
The government also decided to pay out a one-off cash receipt to the beneficiaries of child allowance, HRK 300 for one child, HRK 500 for two children, HRK 700 for three children, HRK 900 for four children and HRK 1,100 for five children - the measure is concern some 130,000 people and is to cost HRK 62bn.
A one-off cash allowance is also to be paid to pensioners in order to mitigate the consequences of price increases. Those with pensions up to HRK 1,850 will be paid HRK 1,200; from HRK 1,850.01 to HRK 2,350 - HRK 900; from 2,350.01 to HRK 3,350 - HRK 600, and from 3,350.01 to 4,360 - HRK 400. The measure is to cost HRK 450mn in total.
Moreover, unemployed people registered at the labour office on Sep 1 will receive a one-off payment of HRK 250 per month for October, November and December.
From Jan 1, the lowest pensions will be increased by 3%, to cost HRK 199mn.
Vulnerable energy buyers will see their allowance increase to HRK 500 from HRK 400 at present. The same increase applies to foster parents.
Higher scholarships and tax-free receipts for students
Funds for the women's employment programme are also being increased by HRK 245mn. The government is also to provide support for students through larger scholarships (HRK 45mn) and support for student centres, in order to ensure an unchanged price of HRK 6.50 in student centres (HRK 75mn), and there is also an increase in student non-taxable income from HRK 15,000 to HRK 24,000 for receipts in 2022 (measure is to cost HRK 246mn).
Subsidies for farmers and transporters
For farmers, the government has prepared grants of HRK 100mn package and HRK 240mn is planned for fishermen. Carriers can expect a support of HRK 1.47 per litre of diesel (HRK 75mn), and for the energy efficiency of houses and multi-apartment buildings, support is almost HRK 1bn.
Encouraging solar and thermal cells
The construction of solar power plants, the construction of thermal stations, etc. will be encouraged, and the VAT on the delivery and construction of solar panels will also be abolished - the measure is to cost HRK 1.9bn. The government also envisages HRK 3.8bn for loans and guarantees for entrepreneurs and HRK 3.1bn for exporter guarantees.
Special tax on excessive profits
Plenkovic also said that the government will propose to the parliament a special tax on profit for the fair distribution of the burden of the crisis - the new tax is to be applied to companies, whose profits have grown especially during the crisis, underlining that this is the principle of justice in the package as excessive profits in the current circumstances were morally inacceptable. Yet, he did not elaborate what the tax rate would be and how it would be defined that a given company makes excessive profits.