Croatian Democratic Union (HDZ) president Andrej Plenkovic and Social Democratic Party (SDP) president Zoran Milanovic faced off on Croatian Television on Friday for the first time ahead of the September 11 early parliamentary election.

The debate host's first question was about VAT. Plenkovic announced that the HDZ, in the second year of its term, would cut it from 25% to 24%, and to 23% by the end of the four-year term. He said the party intended to cover the loss through a 5% growth which it planned to achieve by 2020. He also announced profit tax and income tax reforms.

Milanovic said the SDP too planned to cut VAT in the second year of its term. He said that doing so in the first year was impossible because Croatia was in the Excessive Deficit Procedure. He announced raising the limit of the highest income tax rate.

Plenkovic said the previous Milanovic cabinet had made partial changes, while the HDZ would carry out an integral tax reform.

Asked by the host if property tax should be imposed, Milanovic said this was a European Commission idea, that the SDP did not intend to impose it, and that there would be no new taxes.

Asked about employment, he said the SDP planned to employ 145,000 people in its next term in office, but that this would be a dynamic process. He said that when the SDP came to power in 2011, it was faced with 300,000 jobless. He reproached the outgoing HDZ-led cabinet of being the first which failed to borrow abroad because of political instability at home.

Plenkovic countered by saying that the outgoing government was right to refuse unfavourable borrowing. He said that was a responsible approach. He said this government had managed cut the deficit and achieve economic growth, that it had made a very good development-oriented budget and a national reform programme which was praised by the European Commission.

Plenkovic said the key of his policy would be to ensure political stability. "I want the HDZ to project what it is, a reliable, stable party, and to restore credibility to politics," he said, adding that the next government would have a stable majority.

Asked by the host about the HDZ's announcement that it would employ 180,000 people, Plenkovic said the HDZ wanted to catch up with Croatia's neighbours through growth and measures helping businesses and young people. He announced that the non-taxable income would be raised to HRK 3,750.

Milanovic said that such a measure would deprive local self-government units of HRK 5 billion. Plenkovic responded that this would be compensated with other measures, including by giving real estate tax revenue entirely to those units.

Both officials were agreed that the debt of the motorways should be monetised. Plenkovic said the motorways built with taxpayers' money should be financially restructured and that toll collection should be improved. Milanovic said the motorways had not been paid from the state budget but through loans. "We won't opt for that anymore," he said.

Plenkovic announced that outlays for the second pension pillar would be increased by one percentage point. Milanovic said that would cost HRK 1.5 billion, but Plenkovic insisted there would be no expense, as the outlays would remain at 20%, only that those for the first pillar would be decreased and those for the second increased.

Both officials said that Hungarian energy company MOL must honour its contractual obligations regarding Croatia's INA, and were against closing down the oil refinery in Sisak.

Milanovic said he would try to return INA to Croatia through negotiations with MOL, which has a majority stake now. He said his cabinet had launched arbitration proceedings against MOL "because of disastrous, treasonous contracts on (INA's) gas business" concluded by the HDZ and its former president Ivo Sanader. Plenkovic said Croatia signed over key management rights in INA to MOL in 2003.

Plenkovic said he was unhappy with the state of affairs in agriculture, accusing the agriculture minister in Milanovic's cabinet, Tihomir Jakovina, of failing to draw European Union funds. Milanovic said the outgoing HDZ-led cabinet would leave behind unused funding, adding that his cabinet deserved the credit for the fact that HRK 4.5 billion was absorbed from EU funds in the first half of this year.

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Milanovic doesn't believe HDZ's promise of VAT cut

SDP officials say HDZ would cut pensions by HRK 230

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Plenkovic says Croatia won't let INA become MOL's subsidiary

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