Public Debate on Potential Tax Exemption Will Show Whether It Can Prevent Young People from Emigrating

Public debate on potential tax exemption will show whether it can prevent young people from emigrating. Some measures from the National Demographic Revitalization Strategy outline the steps the government will take to intervene in the labor market and the real estate market through limitations on employers and new tax incentives. In the first case, it's about the heated issue that young people have been dealing with for a long time, as they constitute the largest group engaged in fixed-term employment. The sought solutions also include the possibility of introducing limitations on employers, with the introduction of a "quota" of 5% for fixed-term employment contracts being mentioned for the first time. However, in the first assessments, one can hear that lawyers will need to test this proposal from a constitutional aspect. The other possible measure involves the return of the abolished tax exemption for real estate purchases for young people, namely for buyers under 45 years of age.

What will happen? A similar solution was in place until 2016, and the tax was decreased to 3%. Given the current state of the market, which is thriving, and the achieved significant increase in the average real estate price (10%), it appears that, despite the tax decrease, the government is not at a loss. Therefore, the new proposal could easily lead to a slight burden on the budget, while the fact that it will have an impact is a positive one.

The return of the tax exemption for first-time buyers could be a motivating measure for the real estate market, as any tax decrease is welcome. However, the upcoming public debate will show how much it can "stick" in the aim of preventing young people from emigrating. According to general market estimates, the majority of those who emigrate are those who do not have a job, are underpaid, or work on a fixed-term basis, and therefore are not credit-worthy to purchase real estate. Bora Vujović, Operetta owner, confirms that intervening in these factors can have a greater impact on preventing emigration, as it would have a more significant effect than solely tax relief for purchasing the first real estate. Numerous Counter-Proposals We can also hear various counter-proposals, including the idea that the government should take a more active role, acting as a guarantor to banks, to find an effective solution to overcome potential crises. Recent proposals suggest following the examples of Hungary and Slovenia, which decreased the VAT on some new constructions. In Slovenia, it is 9.5% for apartments up to 120m2 and houses up to 250 m2, and anything above that is considered a luxury and subject to the full VAT rate. It seems that 30% of today's transactions in Croatia involve new apartments, meaning that, through a 25% VAT rate, the government, which has no risk, earns the most from new constructions. Therefore, from some business associations of builders, proposals have been presented to follow the Slovenian model for some new constructions.

Source: poslovni.hr

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