ZAGREB, July 25, 2019 - Addressing reporters after a cabinet meeting in Čakovec on Thursday, Prime Minister Andrej Plenković announced a press conference for Friday where the fourth round of the tax reform, i.e. new tax reliefs for entrepreneurs and citizens, would be presented.

Asked by reporters when would citizens feel the benefits of 200 kuna to 300 kuna more in their pockets, Plenković said that it was necessary to see what the average wage is today and how much it was when his government started working.

"Have a look at the minimum wage, the rate of employment, the decreased unemployment, economic growth, the investment rating, tax and administrative reliefs, and the HRK 8.5 billion surplus," Plenković said.

He agreed with the claim that young people were emigrating every day, even those who had jobs in companies that exported their products and were doing well, announcing that part of the reliefs would be directed at young people, those who have just left the education system and entered the labour market, with the aim of reducing the tax pressure on them as much as possible.

"As far as the overall economic growth and increasing wages is concerned, not one government can do that overnight. All the trends over the past three years have been positive, both in terms of wage and economic growth," he said.

Free movement has enabled something our citizens could not utilise before, Plenković said and added that Croatia is experiencing the same thing that central and eastern European countries did in the first few years of absolute liberalisation, they had emigration trends which then decreased and stabilised.

"The same thing will happen in Croatia," he said, claiming that "we will soon see how significant that impulse was to development."

By raising the standard of living, fewer people will want to emigrate, he added.

More news about taxes can be found in the Business section.

ZAGREB, July 24, 2019 - Tourism Minister Gari Cappelli on Wednesday said that it was time for tax changes in tourism and recommended a VAT rate of 13% on food and beverage services to be part of the fourth round of the tax reform.

"I've been asking for that from day one," Cappelli told reporters ahead of a government meeting.

He informed that he is calling for a VAT rate of 13% on all food and beverage services and added that it was time for that to occur in the fourth round of the tax reform.

Asked whether that would lead to lower prices, Cappelli said that VAT is not the only problem and that the entire tax reform needs to be observed. He said it was time for "tourism to feel an additional step in the fourth round" of the reform and that it was necessary to improve quality and increase wages to make tourism more competitive.

He recalled the recent reduction of VAT on food and accommodation for personnel who work outside their usual place of residence.

"I think that it is time for an extra step, either through personal income or VAT, which would create the opportunity to increase wages and for tourism to start breathing in that segment," he said.

Asked to comment on some cases of "rudely high prices," Cappelli said that the state would not intervene in that but that these cases were not good.

"I'm reading about what is going on. Gone are the times when you could make easy money in a month or two. Tourism has become real business," he said.

Asked whether it was time to discourage apartment-style accommodation, he said 70% of apartments had 3 stars and that he would insist on a reclassification and for quality to be improved.

"They won't be ruined but they will get the message: improve your quality or you will have to shut down," he said.

The Croatian Tourism Association said it welcomed the possible reduction of VAT on tourism products, adding that it would enable the necessary investment in better quality as well as higher salaries.

More news on the Croatian tourism can be found in the Travel section.

ZAGREB, July 15, 2019 - Finance Minister Zdravko Marić said on Monday that a new set of measures that will reduce the labour costs would be presented by the end of the month, but stopped short of specifying them.

On the margins of the international conference "Demographics, Jobs and Growth: Navigating the Future in Central, Eastern and Southeastern Europe", co-organised by the Croatian National Bank and the International Monetary Fund in Dubrovnik, the finance minister only said that when it came to income and net profit taxation, the tax reform had yielded the best results in those segments so far.

He also recalled that last year, the government raised the non-taxable amount of benefits, and as a result, 1.25 billion kuna was paid to 471,000 workers in 2018 under that scheme.

As for the topic of the international conference in Dubrovnik, Marić said that there was no uniform solution to demographic problems, the lack of the labour force and their roles in economic growth.

Marić said that only sound and robust economic growth, job creation and education preparing people for the labour market could facilitate efforts to retain Croats in their homeland, attract other citizens to move to Croatia and persuade expats to come back to Croatia.

More news about taxes in Croatia can be found in the Business section.

ZAGREB, July 12, 2019 - The CEOs of ten leading Croatian companies met with Finance Minister Zdravko Marić at the Croatian Chamber of Commerce (HGK) on Thursday regarding a fourth round of tax reform, saying that without tax cuts it was not possible to increase wages and competitiveness.

"A decrease in income tax and raising the non-taxable amount on allowances (accommodation, transport and meal allowances for employees) were the primary demands by entrepreneurs," the HGK said in a press release, adding that they also talked about overtime work and reducing the profit tax.

The HGK has for years been articulating the demands and problems of entrepreneurs, and this was a continuation of the dialogue between the state and entrepreneurs, HGK president Luka Burilović said.

"The situation is alarming. There is a chronic shortage of labour force, which in turn requires higher wages. Companies can no longer afford to finance such increases with reduced profits as that seriously impacts their investment and development potential and hence the sustainability of their business. That's why future tax changes need to be aimed at relieving the burden on labour," Burilović said.

Minister Marić explained that the fourth round of the tax reform "is still in the analysis stage." He added that talks were being held with all stakeholders and that "wishes are one thing while reality is another." The aim is to further relieve the economy both administratively and financially, he underlined.

More news about taxes in Croatia can be found in the Business section.

ZAGREB, July 10, 2019 - Commenting on demands by restaurant owners for a VAT cut so that they could become more competitive, Finance Minister Zdravko Marić said on Wednesday that prices, too, were important for their competitiveness.

"If we look at VAT alone, we can see that we have higher rates on hospitality services than some other Mediterranean countries, but if we look at price competitiveness, the question is not the VAT rate but prices that we have overall," Marić told the press after a meeting of the inner cabinet.

He said that as part of changes to the tax system a great focus was put on small and medium enterprises and that most of restaurant owners belonged to this sector.

Marić said that within the next three months his ministry would seek additional measures to improve the tax system and make it more competitive, which should provide an incentive to taxpayers and the enterprise sector.

"We will certainly discuss the VAT, but it's too early to make any conclusions," the minister said.

The association of restaurant owners presented a list of demands to the government on Wednesday, including a demand to cut the VAT rate on food preparation and serving from the present 25 to 13 percent.

Marić said the European Commission's revised forecast of Croatia's economic growth this year was a positive thing, adding that it was necessary to keep it up. "That's a positive thing for Croatia and for everyone who wants and likes to invest in Croatia, but I think it's important that we continue on this course that we have set, in terms of everything we can do to facilitate economic growth in Croatia," the minister told reporters.

He said that although quarterly or annual economic growth was important, it was necessary to keep it up.

The Commission today revised its forecast of Croatia's economic growth in 2019 to 3.1% from the previously estimated 2.6%.

Marić said the revision for Croatia was among the three biggest forecast revisions in the EU, alongside those for Hungary and Romania. He attributed Croatia's revision to the 2.9% annual growth recorded in Q1.

He said Croatia's key challenge with regard to economic growth was to raise the contributions of labour and productivity, given that capital was giving good results. There is enough room for progress on that front, he added.

Marić said Croatia could have better results in industrial production and some other activities.

More news about Croatia’s tax system can be found in the Business section.

ZAGREB, July 2, 2019 - The Croatian association of restaurant owners warned on Tuesday that the excessive tax burden was threatening the hospitality sector and called for VAT on food preparation and serving in restaurants to be reduced from 25% to 13%.

The association warned that the tourism and hospitality sectors were on the verge of collapse in this situation of having to pay the highest VAT rate in Europe.

Speaking on behalf of restaurant owners, Marin Medak and Vedran Jakominić told a press conference that they would address their demands to the government and relevant institutions to save the tourism and hospitality sectors which are facing a collapse due to high taxes.

The situation is alarming and it is time for the government to finally open a dialogue with the hospitality sector, they said.

Medak underscored that Croatia had the highest VAT rate on food preparation and serving in the Mediterranean and one of the highest in the EU.

"We urgently call for the VAT rate to be reduced to 13% and for the 3% consumption tax to be abolished because these rates are making it impossible for us to adequately pay local workers who we would rather employ than foreigners," he said.

"It is humiliating to watch people emigrating while the government is sending messages that the employers are insatiable," Jakominić added.

He presented data from the FINA financial agency according to which more than 120,000 enterprises last year employed 882,884 workers and reported a turnover of 680 billion kuna, 22 billion kuna in profit or 3% of the turnover.

The association said that the quotas for foreign workers were a temporary solution and that Croatia requires an effective and long-term tourism and hospitality development strategy, which will among other things, enable Croatian workers to stay in Croatia rather than having to emigrate.

More news about Croatian tourism can be found in the Travel section.

ZAGREB, June 28, 2019 - This year's Tax Freedom Day in Croatia falls on June 29, two days earlier than in 2018, shows a calculation made by the Lipa taxpayers' association, which has welcomed the tax pressure decrease.

The calculation refers to a hypothetical citizen who earns the average wage, is married, has one child, lives in Zagreb, owns a car, does not smoke and pays a TV subscription, Lipa said in a statement on Friday.

Tax Freedom Day is the day of the year until which citizens work for the state and for everything that is paid for from the state budget and when they start working for themselves and their family.

In most European countries, that day comes much sooner than in Croatia, the association says, but also welcomes the decrease in tax pressure compared to the last two years.

At the same time, Lipa is concerned that the burden on the business sector in the form of taxes and contributions continues to be higher by 2.5 percentage points or almost 11 billion kuna compared to the pre-crisis period.

"The decrease in the number of days the average worker has to work for the state shows that previous tax cuts have yielded an effect and that the government should continue reducing the tax burden as well as start implementing reforms that will step up economic growth. Lipa supports further tax breaks, notably cuts in direct taxes, as well as reducing the burden on the budget, without which structural reforms will not be possible to implement," the association says, opposing new requests for an increase in public sector wages if real reforms are not conducted first.

A more dynamic labour market and lack of workers in the private sector provide an ideal opportunity to downsize the public sector, which in the long run is the only way for taxpayers who fill the state budget to celebrate Tax Freedom Day earlier than in recent years, the association says.

More news about taxes in Croatia can be found in the Business section.

ZAGREB, June 20, 2019 - Croatian Finance Minister Zdravko Marić on Wednesday announced a fourth round of tax cuts in accordance with the country's fiscal capacity, saying that each previous round had benefited citizens, businesses and the government budget itself.

Speaking in an interview with the RTL commercial television channel, Marić said that the task force set up for this purpose in 2016 would meet within the next few days to exchange opinions, adding that a public consultation would be held during the summer break to present new measures aimed at relieving the tax burden on businesses.

"We have been reducing taxes for three consecutive years, and it is only logical that citizens and businesses expect us to continue down this road," the finance minister said. He noted that in the last three years the budget had been balanced, public debt and interest rates reduced and the country's credit rating upgraded.

Marić said that everything would be done to increase personal incomes as well. "As for reducing the tax burden on labour and profit, I think we have positive effects here," he said, stressing that they always look at the tax system in its entirety.

Commenting on the proposal by the opposition Social Democratic Party (SDP) that the non-taxable portion of personal income should be increased from 3,800 kuna (513 euro) to 5,000 kuna (675 euro), Marić said that during the term of the SDP government net wages had increased by about 230 kuna (31 euro), while in the last three years they had risen by over 700 kuna (95 euro).

He said that a real estate tax would not be introduced next year.

More news about taxes in Croatia can be found in the Business section.

As Novac writes on the 6th of June, 2019, fiscal consolidation, investment and business barriers and the burden on the Croatian economy make things very difficult for business in Croatia, according to the results of HUP Skor for 2018, showcased by the Croatian Employers' Association (HUP).

It is a tool to measure the progress of reforms in the twelve critical areas necessary for doing better business and improving life in the Republic of Croatia when compared to the EU 10.

As Gordana Deranja, HUP's president, explained, "HUP Skor is an objective measure of how much we're really reforming."

Since the countries of central and eastern Europe progressed faster than Croatia last year, Croatia's HUP Skor for 2018 is a rather embarrassing 36 out of the possible 100 points, and what continues to push Croatia to the bottom, as was stated by HUP, are taxes and similar burdens. The ratio of general government tax and social contributions to the GDP in Croatia is continuing to rise, and even now it's exceeding the maximum achieved before the reforms in the tax system.

''Structural problems continue to pose a serious threat to adaptation to one of the next crises and permanently limit the speed of economic growth. Although we're satisfied that [Croatia's] GDP grew by 3.9 percent in the first quarter of this year, the fact is that this is still too little and we should be at least four percent more in the long run,'' Deranja said.

"The Croatian economy is the most burdened and that's reflected in its productivity. The economy is congested and has no power to grow," she said.

In addition to the above-mentioned problematic areas in the Croatian economy, the encouragement of investment, productivity and competitiveness, the justice system and the labour market, education, health and pension systems continue to be ''in the red''.

''This year's result suggests that Croatia is lagging significantly behind the EU member states from Central and Eastern Europe, and what's particularly worrying is the fact that Croatia's score is worse than that in countries which are less developed than Croatia, such as Bulgaria and Romania,'' said Davor Majetić, Director of HUP.

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ZAGREB, May 16, 2019 - Finance Minister Zdravko Marić said on Thursday that tax revenues had increased by 3.3% in the first quarter of the year while budget expenditures increased by about 6%, noting that the somewhat higher rate of expenditures compared to revenues was usual for that time of the year.

Addressing a press conference, Marić said that revenue from VAT and profit tax increased by 3.3% while excise taxes increased somewhat "more strongly." He underscored that he was particularly pleased with contributions for pension insurance, which recorded an increase in revenue of over 5%.

When it comes to expenditures, it increased by about 6%, with Marić noting that the January-March period is always "the worst" in the budget sense.

Responding to reporters' question as to whether VAT would be decreased from 25% to 24%, Marić recalled that that has been regulated by law and will enter into force as of 1 January 2020. "We included that in the law and it was passed in parliament for VAT to be reduced from 25% to 24% as of 1 January 2020," he said.

Marić would not comment on an idea by former central bank governor Željko Rohatinski, who said that the Uljanik shipbuilding company could be salvaged by printing money, but said that that was a question for the central bank.

Thursday's issue of the Novi List daily ran an interview with Rohatinski who said that "we can conduct an active monetary policy and salvage shipbuilding, despite being told that signals from abroad say that isn't possible."

The article also notes the reaction of the bank's incumbent governor, Boris Vujčić, who said that it would be best for Rohatinski to explain just how he would achieve that, as well as noting that Croatia currently has a surplus liquidity of 36 billion kuna.

More budget news can be found in the Business section.