The Croatian government said on Monday that it would seek to extend a reduced value-added tax rate on energy products through early 2027, a move aimed at containing consumer prices and shielding households and businesses from inflationary pressures.
Speaking at a press conference in Zagreb, Tereza Rogić Lugarić, a state secretary at the Ministry of Finance, announced that the ministry would propose amendments to the VAT law to keep the reduced 5 percent rate on certain energy products in place until March 31, 2027.
The measure, first introduced as part of broader efforts to stabilize prices, is currently set to expire at the end of March this year.
Shielding Households From Price Pressures
Officials argue that the lower tax rate has helped maintain price stability at a time when energy costs across Europe have been volatile.
“The measure has produced good results so far, and in that sense we want to continue with it,” Ms. Rogić Lugarić said, adding that the policy had helped ease inflationary pressures on households and businesses.
The 5 percent VAT rate applies to natural gas supplies, district heating services and related fees, as well as to firewood, pellets, briquettes and wood chips — fuels widely used during the winter months.
Without the extension, the VAT rate on those energy products would revert to 13 percent. The Finance Ministry estimates that such an increase would likely feed into higher consumer prices, with consequences for living standards and operating costs for companies.
A Measured Fiscal Cost
Extending the reduced rate will carry a fiscal price. According to ministry projections, the state budget would forgo approximately €47 million in revenue. Of that, €35 million would be lost between April and December of this year, and an additional €12 million from January through March 2027.
Officials said the targeted nature of the measure allows for clear monitoring of its effects. Energy prices, Ms. Rogić Lugarić noted, can be calculated with precision, making it easier to track how tax adjustments influence final costs.
Balancing Stability and Revenue
The proposal reflects a broader balancing act facing European governments: how to support households amid lingering inflationary concerns without undermining fiscal sustainability.
Croatia, which adopted the euro in 2023, has sought to anchor expectations around price stability while maintaining public finances within European Union guidelines.
The extension of the reduced VAT rate now moves to the legislative process, where lawmakers will debate whether the cost to the treasury is justified by the relief it provides to consumers.
For many households facing winter heating bills, the difference between a 5 percent and a 13 percent tax rate may prove more than a matter of arithmetic.