ZAGREB, March 21, 2018 - Without tax exemptions and differential tax rates, standard Value Added Tax could (VAT) be reduced to 20%, provided that the pension system and public healthcare are overhauled in parallel, the head of the Tax Administration Zdravko Zrinušić said at a working lunch with the Croatian Employers' Association (HUP) in Zagreb on Wednesday.
"It is essential to conduct, first of all, pension and public healthcare systems reforms, given that the systems that generate losses every year are meaningless," Zrinušić said, adding that the authorities should make much deeper changes than the overhaul of the taxation system if they want to improve a state of affairs in Croatia.
He is hopeful that in 2019 the standard VAT rate of 25% will be lowered by one percentage point to 24%. However, he warns that the lowering of VAT by one percentage point results in two billion kuna less collected from the tax.
He noted that in the EU only Hungary with the 27% standard VAT has a higher VAT rate than Croatia.
Zrinušić underscores that one of the biggest challenges of the Croatian economy is the eradication of the grey economy.
According to findings of 1,039 tax inspections in February, a total of 149 administrative measures and misdemeanour charges were filed in 165 cases. In 181 cases, no bills or receipts to support payment were issued.
HUP leader Gordana Deranja called on the Tax Administration not to behave like "repressive apparatus".
