ZAGREB, 26 Feb 2022 - Croatia's Tax Administration estimates that the amount of tax returns this year will be similar to last year when approximately HRK 1.89 billion (€252 million) was reimbursed to taxpayers for excess amount paid to the state budget.

The tax filing deadline expires on 28 February, while the reimbursement of overpaid tax starts on 2 May.

In response to an inquiry from Hina, the Tax Administration has said that until 20 February 2022, the procedure of the assessment of tax base and tax liability concerning the income tax was conducted for 694,674 tax payers. It has been established that 633,278 of them paid excess amount as tax and they are entitled to the tax refund in the amount of 1.73 billion kuna, while 50,006 are expected to pay an additional HRK 107.25 million as tax in arrears. The remaining 11,390 tax payers had nothing for reimbursed tax refund or for additional payment.

Persons obliged to fill out their own tax returns are owners of enterprises, freelancers or for instance,  seafarers on international shipping lines and Croatian residents who earned income abroad in previous years.

After income tax was abolished for young people up to 25 years of age and taxation for those between 26 and 30 was cut by 50%, about 142,000 young people were covered by this scheme in 2020 when they received about HRK 700 million in tax returns based on changes to taxation in the fourth round of reform which entered into force at the start of 2020.

The Tax Administration expects the similar number of tax refunds and the similar amount of reimbursement under this scheme this year, too. 

The Tax Administration is the administrative unit within the Ministry of Finance whose basic task is to implement tax regulations and regulations concerning the payment of obligatory contributions.

(€1 = HRK 7.5)

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ZAGREB, 5 Sept, 2021 - Economy Minister Tomislav Ćorić said on Sunday that the Value Added Tax (VAT) on food would not be lowered this year, considering the fact that the economy has just started to stablise since the 2020 crisis caused by the COVID-19 pandemic.

"The reduction of the VAT rate cannot be implemented this year. We have just started to stabilise since the crisis in 2020. Such moves should be considered within medium-term perspectives, that is in one or two years," the minister said in his address to the press while attending his ministry's green campaign "#ZaZeleniSvakiDan" in downtown Zagreb.

The minister expects the stabilisation of the prices on the global market in the coming months and the effects of that trend on the Croatian market after that.

"The stabilisation of chains of distribution is a prerequisite for the stabilisation of price of food and also of construction material," he added.

The minister is hopeful that 2022 would usher in stabilisation, supported by some measures from the field of the monetary policy.

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July 16, 2021 - One month after the local elections in Croatia, the liberal/center Fokus party president shares with TCN reflections of his Zagreb mayor candidacy, details on political views, plans, and hope for the future of Croatia. Learn more about the Fokus party in an exclusive Davor Nađi interview conducted by TCN reporter Ivor Kruljac.

2021 local elections for Croatia concluded back in June, and as with every local election, the majority of political parties whose candidates earned some new positions in the local governments managed to taste both victories and losses are overall happy. Some parties from both left and right political wings celebrated as scientists whose work won the Nobel prize. Even election losses were interpreted as victories, drawing attention to the number of votes, that although they may not score political roles, show growing support. If there is a once in four years occasion when political parties have as much optimism as the Croatian Adriatic has drops of water, it’s the local elections. 

Currently in parliamentary opposition, Davor Nađi, president of the Fokus political party, politically declared as center-oriented, also doesn't hide his optimism following the result, but it seems he is a bit more toned down in that excitement than some of his political competitors. Satisfied to see his colleagues from the party keeping their previous positions, and some even selected for new ones, he is expecting the Fokus party to grow in the future while remaining aware of Fokus being new and young on the scene - is careful to say more than he can bargain for. Nađi ran for Zagreb mayor, but in the end, didn't manage to win neither the "main prize" nor a seat in the Zagreb Assembly. He noted, however, that his candidacy helped to attract new Fokus members in Zagreb, but again stating it without grandiose announcements, rather with mild optimism, careful not to step out of the line of realism. 

In an e-mail interview, Nađi commented what happened in the Zagreb elections, did NGOs stepped out of line in supporting current mayor Tomislav Tomašević, and what do Fokus voters find attractive in the political party best known for reforming the town of Sveta Nedelja. Are they American-styles libertarians as described by some, and what European politicians are in line with Fokus’s ideas, are just some of the things Nađi revealed in the interview.  

screenshot / N1

You are the president of the Fokus party, and candidates from your party had won in Sv. Nedelja, Samobor, Sv. Ivan Zelina and Dugo Selo. So, your party currently has four mayors. Can you list for our readers where your party had candidates for mayors, assemblies, and counties? How do you comment on „your mayor's" first-month post-election, and what moves would you point out as excellent in that time?

Except for these four cities, we also won in the municipalities of Križ and Pirovac. We ran for mayors and local and regional assemblies mostly in central Croatia (Zagreb and Zagreb county) but also in Čakovec, Slatina, Petrinja, Pirovac. We won 50 members of local and regional assemblies, including the president of assembly in Čakovec.

Most of our mayors were reelected, so they just continued working on projects. However, I would like to point out our new mayor of the city of Samobor, Petra Škrobot, who already contracted procurement of software for transparency of city budget and public procurement, which is one of the flagship policies of the Fokus party.

How would you briefly explain to our readers what your party represents and advocates politically? What politicians, foreign or Croatians are your role models, and why?

We represent the fight for lower taxes and fewer regulations for citizens and the private sector and for a more efficient public sector. That means that we want that people and companies can keep more of the money they earn for themselves and decide on what they want to spend it. For example, that is the only correct way to solve the housing problem – to make sure that people earn and keep more money. Further on, that means that the private sector gets better value for money through better service of the public sector where, in our vision, worst or/and unnecessary public servants would be let go, and the best workers would get a financial reward. We also talk and act on investments in infrastructure, which is important for preparing for future climate change challenges.

I can’t say I have some role models in politics, but I like the politics of Dutch PM regarding the economy because they have a small and efficient public sector that provides good service to their citizens. That allows them to keep their economy very competitive, which results in a better life for their people.

You express deep care for private investments, lowering taxes, and overall creating a better environment for private business and entrepreneurship. But, when talking about entrepreneurs in Croatia, people roll their eyes as many of our famous „entrepreneurs“ are associated with crime, corruption ties to politics, and unfair privatization that ended up in many people losing their job. What is your opinion on these entrepreneurs, such as Todorić or Horvatinčić? How to fix that negative perception of entrepreneurs?

Yes, the private sector is very important to us. We care about entrepreneurs but also about their employees. We also care about the best public servants too. 

I think that public opinion on entrepreneurs is changing in a good way because of a new generation of successful entrepreneurs that succeeded in the global market with no connections to the government. Todorić and Horvatinčić are the exact opposite of them and represent everything that is wrong with this country. It’s wrong to call them entrepreneurs because they are a product of crony capitalism. The only cure to fight people like them is an independent and efficient judiciary.    

New option for liberals in Croatia 

You ran for mayor in Zagreb. The polls didn't give you too much of a chance, but libertarian (classical liberal) oriented site Liberal.hr said that you could be „the biggest surprise of the Zagreb elections“. To tell you the truth, it didn't seem likely you will become a mayor, but I was very surprised you didn't win a seat in the assembly. What went wrong in Zagreb, and how is it possible that the city with the most developed business climate and entrepreneurship (and with a lot of entrepreneurs) didn't reward your entrepreneurship-oriented ideas, at least with the seat in the assembly?

Well, Fokus is a new party, and I’m relatively new in politics, so a lot of people weren’t informed about our program and achievements. Fokus party didn’t exist in Zagreb until this year, while other parties were building their organization for many years, so it was hard to catch up in just a few months period during a partial lockdown. However, even though we didn’t win a seat in the assembly, we achieved some other goals. Now we have a lot of new members, and a strong organization in Zagreb and a lot of people have heard about FOKUS for the first time. Further on, we are the strongest liberal party in Zagreb, and we had better results than a lot of old traditional parties. So I believe that in the future, our support will only grow in Zagreb.

Davor Nađi during his campaign in Zagreb © Davor Nađi

You said on your Facebook site that you didn't receive enough media attention, and indeed you weren't invited to the debates (with the explanation being that only those who earned 5% in polls will be invited). However, you had banners and posters across Zagreb where you talked about how you are experienced to be a mayor because of Sveta Nedelja, where you were a deputy mayor, and the town did receive media attention few years back for amazing changes introduced there. What was your contribution to the transparency of public servants, lowering taxes, and canceling the subtax in Sveta Nedelja as deputy mayor? 

I was the designer of those policies with the strong support of mayor Zurovec and the city council, and I was working on these policies from the beginning until the implementation. I’m very proud of that because Sveta Nedelja did the biggest tax cut in Croatia, became the most transparent city in Croatia, and received a reward for the best local economy three years in a row.   

You criticized some of the moves by the new Zagreb mayor Tomislav Tomašević. Can you repeat what do you find problematic in his governance so far, but also, is there anything positive, something you would support him in if you made it to the Zagreb assembly?

There are some things that are good, and some are not. I reacted on one occasion, but let's wait a little bit more time before I can comment general impression so far.

However, for our readers who are foreign and didn't have the chance to see your comment in Croatian, can you briefly explain what did you found problematic with Tomašević early on to the point that you had to react publicly?

He stopped most of the public procurement. Even though I understand his concern that there might be corruption problems, that is not the way to solve that problem. That problem should be solved with better process and clear guidance from the mayor to the city administration because if public procurement is stopped for too long, there will be problems for citizens. On the other hand, in a short period of time new mayor will not be able to change much if he doesn’t make the process of public procurement more transparent and efficient. 

Far from the US philosophy

 Once on N1, you said political parties in Croatia are still pretty socialistic. Since on that occasion you were a guest at N1 regarding Zagreb Reconstruction Bill, did you mean they were socialistic just in that regard or in general? Are Croatians also socialistic too?

They are socialistic in general, and that bill was just the latest example. That orientation of political parties in Croatia resulted in a situation in which an enormous part of the economy depends on the state so we actually have crony capitalism. That sends the wrong message to the people, so people lose self-confidence and think they can’t earn for themselves and their families, and instead, they rely on the state to help them in every aspect of their life. They simply don’t take into account the fact that the state is corrupt and inefficient, which may be because of inadequate financial literacy.

However, it seems to me that the tide is changing with the lead from the local level from cites like Sveta Nedelja and that people are beginning to see the benefits of liberal policies.

When you say the parties are socialistic, some could think this is the heritage of Yugoslavia. However, aside from the communist experiences of South-Eastern Europe, the overall European political culture and tradition goes along the way „yes to democracy, yes to free market, yes to the individual freedoms“ but also „yes to social care, yes to free health, yes to free education, yes to supporting cultural and artistic projects, scientific research, etc“. Many people see Fokus as being against that and wanting to dismantle that European political culture with American political culture, which seems to be notorious in Europe for its health and education system, which as people see it, „is alright if you have cash, but not for the poor“. Are you indeed into „making Croatia American rather than European?“ and if so, how would you address the mentioned sectors of health, education, culture, and science? What about HRT in that context (as the idea of a public TV financed by the state is a European invention in the media landscape)?

Of course, we are not for an American-style economy. We prefer the Dutch or Scandinavian style with high economic freedom and adequate social benefits. Some people don’t understand that “free” health care doesn’t exist. Taxpayers pay for that. And if we think a little bit more about our health care system, do we really have health care that is accessible to the poor? How long are the waiting lists? People pay taxes for health care, and when they need it, then they don’t get it. That is not free health care! Almost the same is for everything else. I believe that vouchers would solve that problem because then even poor people could afford health care service from the private sector, and the public health care system would have to be more efficient and provide better value for money. The same thing is possible with education. HRT should be significantly downsized, and subscriptions decreased with the option to opt-out from their service.

When it comes to the overall Croatian political landscape, Fokus does offer something truly different from other political options, and it seems quite right to expect that Fokus will continue to grow. But, what do you think made Fokus uprise to start in central Croatia, in Sveta Nedelja, Samobor, Dugo Selo, and Sv. Ivan Zelina? Is there something that makes the culture and society in these areas different comparing to the rest of Croatia that they were the first to recognize and give a chance to your program?

Fokus also has a mayor of Pirovac in Dalmatia and president of the city council in Čakovec, members of City council in Slatina, etc, so I wouldn’t say that our policies are only recognized in central Croatia. However, we have better support in parts of Croatia, where fewer people work in the public sector and more in the private sector. That is not surprising since we promote policies that would result in a more efficient public sector and less red tape and taxation for the private sector. 

 © Davor Nađi

 Up next: European elections and Croatian Parliament 

On the note of local success, many view local elections as a forecast for what can happen in parliamentary elections. How would you rate your chances on the next parliament elections based on local results?

I’m very optimistic. Fokus has a very good position to grow and to achieve a great result. Fokus is already a success story and we have grown in a number of members in every part of Croatia. I believe that a new government after elections will not be formed without a strong party or coalition from the political center, and if we look at the results of local elections, Fokus is the fourth party by a number of mayors in Croatia. Also, we are the strongest party of the political center in national ratings, so that gives us reason to believe that we can gain even more support from our citizens in the future.

 Back to the Zagreb elections. The two main candidates represented Gree-left values and national, conservative, sovereign values. Tomašević not only got support from some of the other European mayors but, just as with Škoro's values, there are plenty of same-minded people in Europe sharing those values. You mentioned your appreciation for the Dutch Prime Minister, but are you as well in contact with like-minded parties and politicians in the EU?  

Fokus is a new party, so we still haven’t formed significant international alliances, but we can see ourselves working with other European liberal parties. Of course, the one with the best results is Dutch VVD that is in power on the state level. 

But when we talk about the support that Tomašević or some right-wing parties and NGOs in Croatia had in recent years from abroad; I would say that there is a thin line between support and meddling into elections, and I would say that that line was crossed.

But, can we expect that Fokus will try to be in communication with them? Any plans for running on European Parliament elections as a good point to meet with other think-alike politicians in the EU?

I said that we don't have some significant alliances with them. However, we are in contact with some of them. We will see where that will take us. EP elections could be the first opportunity to test eventual cooperation.

And regarding what you said about there being a thin line between support and meddling in elections and how that line was crossed in Zagreb elections by NGOs, is there a risk of entrepreneurs doing the same thing when supporting, either financially or with public influence, certain parties? How can we prevent such meddling legally but yet with respect to the right of political expression to organizations and individuals?

I don’t see the financial support of Croatian entrepreneurs to political parties as a problem. The problem is only if they receive privileged treatment after the election in return for giving financial support. I would go one step further and say that we should welcome donations of private individuals and companies to political parties because that would mean that political parties would be less dependant on public financing. That should be a normal part of the domestic election process. However, if foreign money is included in financing political parties or their leaders, direct or through other channels, then we as a state have a problem.

To conclude, you are MA of the economy, and you talk a lot about economic solutions. Are our economy and business truly the core issues politicians need to address? Additionally, what are your views and the views of Fokus on defense policy, diplomacy, international relations, emigration policy (asylum seekers trying to enter Croatia), Croatian veterans, diaspora, and the ideological, historical disputes among Croatians, which for better or worse seem to often resolve the elections on a parliamentary level?

It would take a much longer conversation to answer all these questions, but I will try to answer in few sentences. Yes, I believe that economy is the most important issue that needs to be addressed because that is the place where value is created and which provides a better life for people and necessary funding for all government programs. Without a strong economy, the state can’t finance defense or social benefits. Unfortunately, you are right that elections are, in the biggest part, decided on other issues that target emotions rather than reason. 

When it comes to defense policies, liberals believe that the basic tasks of the state are to provide to their citizen's rule of law and protection from foreign and domestic threats. So we should have adequate defense capabilities. On the other hand, we have no problem financing social benefits to real war veterans, however almost 30 years after the war, there shouldn’t be any new users of these benefits. Regarding international relations, our position is that Croatia should remain an EU and NATO member with strong relationships with the USA and with a clear position that China can’t be our partner until they don’t behave by the same rules like everyone else with the biggest concern regarding human rights issues.

Even though we are a small country, that doesn’t mean we can’t lead by example. It is up to us if we will stay on the bottom of every European statistic table or we will start going up. We have all the resources we need to thrive.

Learn more about Croatian politics and history since 1990 on our TC page.

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ZAGREB, Dec 20, 2020 - A total of HRK 15.5 billion in tax debt, including HRK 6.8 billion on account of principal and HRK 8.7 billion on account of interest, owed by 346,570 taxpayers, has been written off since 2017 because the debt became time-barred, the Vecernji List daily wrote on Sunday.

The fact that a large part of the written-off debt is on account of interest shows that these are debts for which the Tax Administration kept data in tax records but for which it was not possible to enforce debt collection due to lack of assets, it was said in response to the daily's question. The daily had asked the Tax Administration for data on the total number of time-barred tax debts, the amount that had been written off because of that, and whether there was a need for any normative or organisational intervention in the tax system.

The data submitted is from 2017 because as of 1 January that year an important systemic change has been in force. Since then the statute of limitations for the right to collect taxes has been monitored ex officio, so taxpayers no longer have to submit a request.

Any tax debt that was not collected after six years, through the taxpayer's application or a decision of the tax authority, is written off from tax records.

As of 2017, if a tax debt has not been collected using all available enforcement proceedings during six years or if the debt is not secured by a pledge or mortgage, the tax authority is obliged to write off the time-barred debt from tax records.

Based on this, the Tax Administration conducts a systemic debt write-off once a year for debts that fall under the statute of limitations on 1 January that year.

ZAGREB, November 9, 2020 - As of next year, Croatia will tax a majority of salaries only 20%, plus local tax, which is four percentage points less than now, Vecernji List daily said on Monday.

The government believes this change will reduce the tax burden on salaries by HRK 2 billion annually, the paper said.

How much each employed person will benefit from the cut depends on their gross salary and deductions for children and other dependent family members.

Income tax is paid by all employed persons as well as the jobless who do part-time work and pensioners whose allowance exceeds HRK 4,000.

Finance Minister Zdravko Maric says two-thirds of those liable for income tax actually do not pay it because their income is below the taxation threshold when deductions for dependent family members are added to their non-taxable monthly income (HRK 4,000) .

Those not paying income tax cannot expect anything from the tax rate cuts going into force as of January 1, which has been a source of numerous frustrations and dissatisfaction for a long time. From every salary, regardless of its amount, is first deducted 20% for pension contributions, while the rest is considered as income. Those whose gross salary is below HRK 5,000 do not pay income tax, only HRK 1,000 for pension contributions.

Additional deductions make the difference even more pronounced. If a worker with a gross salary of over HRK 10,000 has two children who bring an additional HRK 4,250 in tax deductions, there is nothing to deduct, so they cannot expect the reduction of the income tax rate to 20% will result in a higher salary as of January 1.

Children and dependent family members bring big deductions due to which parents with two or more children generally do not pay income tax. Reducing the income tax rate from 24 to 20% could result, for an employed Zagreb resident with an average gross salary of HRK 9,200 without children or dependents, in a HRK 160 higher monthly salary as of January 1, Vecernji List said.

(€1 = HRK 7.5)

ZAGREB, July 25, 2020 - Legal amendments which will cancel the tax on property transactions could be in parliamentary procedure in the autumn, but when they could go into force remains unknown, Vecernji List daily said on Saturday.

As the ruling HDZ party promised in its parliamentary election campaign, the Andrej Plenkovic cabinet has announced that during this term it will cancel the 3% tax on property transactions, which last year brought local governments between HRK 1.1 billion and 1.2 billion, the paper said.

The tax revenue belongs to the towns and municipalities where properties are located. According to the Zagreb Institute of Economics, last year 111,000 properties in Croatia changed owners, first and foremost land and buildings whose value was HRK 40 billion.

In 2019, the year before COVID-19, property transactions accounted for 10% of the annual GDP. Most of the money (HRK 16.6 billion) was invested in the purchase of flats, buyers invested HRK 8.4 billion in building land, HRK 7.5 billion in family houses, and only HRK 1.8 billion in farmland. The average price of a flat sold was about HRK 630,000.

In the first half of this year, the value of properties sold dropped by 25% from H1 2019.

The government would not confirm if the 3% tax on property transactions will be cancelled at the beginning of 2021 or later.

According to unofficial reports, the government could put forward the relevant legal amendments in the autumn, when income tax is expected to be cut from 24% to 20% and from 36% to 30%, Vecernji List said, adding that property tax changes would depend on developments with the coronavirus.

(€1 = HRK 7.5)

The Croatian Employers' Association (HUP) has welcomed changes to the Law on Companies and has urged that no new burdensome regulations be introduced.

As Ana Blaskovic/Poslovni Dnevnik writes on the 23rd of April, 2019, recent changes to the Law on Companies, which simplifies the establishment and the liquidation of companies, will enable entrepreneurs to be more competitive and help Croatia to climb up and improve its place on lists such as that of the World Bank, Doing Business, on which Croatia occupies 68th position out of 140 countries worldwide. 

The Croatian Employers' Association (HUP) has openly welcomed these positive changes, but has warned that this step in the right direction should not end up with people simply becoming lost once again but this time in a maze of new obstacles.

"The Croatian Employers' Association welcomes the simplification of procedures related either to the establishment of companies or to their liquidation, and we expect the introduction of changes that will stimulate the competitiveness of the Croatian economy and make it easier to monitor rapid changes on the global market," stated Admira Ribičić, the director of legislation and legal affairs at the Croatian Employers' Association which itself proposed changes in the same direction.

Better competitiveness should bring forward the ability to establish a simple and ''normal'' d.o.o. online, just with the payment of court fees, and without the cost of a public notary. The changes to the law open the doors for faster and easier business/company registration. However, even though e-foundation has now come into effect, the application that will enable it to function correctly will only come into force in September.

The Croatian Employers' Association has also readily welcomed the removal of the stipulation of reserving a company name, the shortening of the deadline for the court to make a decision on registration in the court registry from fifteen to five working days, as well as the provisions for the simpler and cheaper liquidation of a company, simply with a statement proving the non-existence of any debts.

"What worries us most is that we don't end up with a situation in which we remove a whole host of regulations and end up accidentally replacing them with different ones through changing the regulations. In Croatia, there are between 300 and 400 new regulations introduced annually, or amendments to existing ones, and each of them "laments" the danger of introducing a new administrative or financial burden,'' Ribičić concluded.

Make sure to follow our dedicated business page for much more on Croatian companies, doing business in Croatia, investing in Croatia and Croatian products and services.

Click here for the original article by Ana Blaskovic for Poslovni Dnevnik

As Lea Balenovic/Iva Grubisa/Novac writes on the 17th of April, 2019, Croatian tourism's current business model is unsustainable and has some serious challenges, according to Emanuel Tutek, a partner at the Horwath HTL consulting house, who stated this at the very beginning of a conference on the challenges of the Croatian tourism sector at Edward Bernays High School, the co-organiser of which was Jutarnji list.

Since 19 percent of Croatian GDP comes either directly or indirectly from tourism, the unsustainability of the system is a more serious issue, he added.

''First of all, our tourism is an extremely seasonal sector and as much as 86 percent of all tourism activities in Croatia take place during the summer months. It's also problematic that 96 per cent of these activities are realised on the coast and in Zagreb. In translation, this means that we have plenty of room for progress and the development of our tourist offer across the rest of Croatia, as well as the extension of the season. We are well below the European average. For example, if we compare just the peak of the tourist season, ie July and August, there is 10 to 20 times more of a burden on the area and the residents in Croatia than there is in other European countries. Just remember how some of the destinations and beaches look in July or August,'' warned Tutek.

He also added that Croatia has plenty of room for progress and development in the quality of the accommodation it provides. The Croatian hotels that, as Tutek says, are the pearl of Croatia's hospitality, are very much losing the battle with the hotel industry in the rest of Europe, and the alarm that should be enough to wake the country up is also the fact that the revenue made from tourists' overnight stays in Croatia is less every year.

In addition to this, Croatian tourism is feeling the country's ongoing demographic crisis bite hard, and has a human resource problem as a consequence. This is, as was explained by Tutek, actually a global problem. However, since the international labour market is far more competitive than the Croatian one is, foreign countries are filling their gaps with Croatian workers. Croatia is, unfortunately, at an unimpressive 100 of 138 countries in the world according to the labour market competitiveness index. An even more concerning piece of information shared by the Horwath HTL consultant was that Croatia is the last and second to last in the world on the ladder of attracting and retaining workers.

''We have no solution. The answers to this can't just be some lump sums and other initiatives, we need something more fundamental,'' he warned. One of the negative factors in each case is the uncompetitive average salary. In nearby Austria, for example, in the hotel sector, wages are about 122 percent higher. Still, the hotel industry here in Croatia has experienced a great discrepancy in numbers, and they have therefore begun to increase employee salaries for the last two summer seasons, which has been a fruitful decision. With the rise in salaries and expenses, revenue also grew.

In addition to the inadequate management of human resources, huge problems are also created by the Croatian tax policy. Property tax, Tutek said, practically doesn't exist in Croatia. ''We're the champions of how good private landlords have it. Croatia is a tax oasis,'' he claims.

''We want to be competitive, but there are a number of things that we're not even close to, not even in the wider environment. VAT reduction is certainly important, and there is also the question of consistent policies. It is important for us to have a perception of what will happen in the future at some point, but if the policies constantly change then we can't have a stable business,'' said Sanjin Šolić of the Lošinj hotel group Jadranka.

Davor Lukšić, President of the Lukšić Croatia Group, agreed with him, pointing out that Croatia's 25 percent VAT rate is very high, and even with a rate of 13 percent there would still be room for progress. "We have to remain competitive, especially now when other destinations in the Mediterranean are making a come back," Lukšić added.

But if one was to as Croatian Tourism Minister Gari Cappelli, the problem of the high VAT rate is one of the easiest problems to solve in the Croatian tourism industry. The minister claims that the Croatian Government could lower the VAT rate with one decree, bringing it down to 10 or 13 percent, and such a decision is in the government's plans for the beginning of next year.

''We have a problem with having five-star hotels in two star destinations. First of all, we have to start improving the quality of the destination and spend the whole year measuring what's happening and only after a few years will we see whether both residents and tourists are happy, as well as service providers and the environment. If everyone is more or less happy, then it makes sense to invest in a four or five-star hotel,'' stated Minister Cappelli, adding that in Croatia, it often happens that investments are made in luxurious hotels first, but not in the development of the destination in which it is located.

"Well, we have cases where five-star hotels don't have sewage systems but septic tanks," he said. The minister also referred to the initial lecture by Emanuel Tutek about the key challenges facing Croatian tourism. He agreed that there was always room for progress, but he also pointed out that he was tracking the figures daily and that he couldn't bring himself to agree with all the alarming warnings about the unsustainability of Croatian tourism.

''We're a strange people, two years ago there were no tourists and they wanted to get rid of me, now there are a lot of tourists, and they want to get rid of me again, the projections of what's to come in two years keep coming in, and they're already that I'm shaking in my chair,'' said Cappelli, adding that Croatia is spending what it earns and has therefore finally got an investment rating.

''Now the pressure on public finances is being relieved and the taxes on the economy can be reduced slowly,'' he said.

If the Croatian tourism association is asked for their opinion on the matter, this is last chance saloon for this tax relief to actually become a reality. Namely, it is anticipated that hotels could reduce the volume of their investments by as much as thirty percent over the next three to four years. ''We want to warn the government that it must not let that happen. We have to invest, but we expect that the government to create measures to encourage that and not just put us off,'' said Jadranka's Sanjin Šolić.

Dubrovnik has experienced not only growth in terms of tourism but also the improvement of infrastructure in recent years, Lukšić believes. However, despite the wild popularity of this particular southern Croatian city, it has multiple problems during the winter season.

''In the last two years, we have extended the [tourist] season and the so called ''congress season'' has helped a lot. But we all have to sit around the table and design a strategy for the winter season, which is actually the only problem,'' Lukšić said, arousing a grin from Šolić, who, having being on an island, has much bigger problems.

''It's easy for Dubrovnik. Imagine how it is for us to extend the season! You need to get to the island, the bridge is a problem, the bura is a problem, everything is a problem. We're less competitive than our colleagues on the mainland whichever way you turn. The Chinese, the Koreans, whoever comes to Croatia, lands in Zagreb, goes to Plitvice, Split and Dubrovnik, nobody comes to us,'' complained Sanjin Šolić.

That is why his team sat down together at the table and decided to turn to health tourism for which Lošinj has natural resources, a strategy and a future, said Šolić. Another solution for the development of island tourism is golf. Therefore, a location permit is currently being sought for the construction of a golf course with eighteen holes, with which will be a hotel and villa that will have a total of 800 beds.

''These are the two routes we have on Lošinj. People don't play golf in July and August because its too hot. During November, December, January, February and March, the weather is wonderful and we'll fill our capacities that way,'' he noted.

Emanuel Tutek welcomed this discrepancy in Croatia's tourism development strategies at various locations.

''Not all destinations are suffering the same issues. In Dubrovnik, there is a problem with excessive demand, and the quality of the offer needs to be worked on to reduce the number of tourists. In Istria, the offer should be increased. This has, for example, been done in Maistra. Nobody thought it would pay off to build a five-star hotel in Rovinj, but after the construction of the hotel, the rest of the sector was accompanied by the arrival of tourists and the development of the destination.

However, in addition to the respective issues destinations face in Croatia, the eternal problem facing the entire Croatian tourism sector is labour and wages.

''Salaries are a problem, they're still a base for attracting workers,'' said Tutek, agreeing with the CEO of Jadranka, but as he said, it's difficult to increase salaries because there isn't enough revenue.

"When the minister sorts us out with less taxes, I'll give the rest of it in salaries," he stated.

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Click here for the original article by Lea Balenovic and Iva Grubisa for Novac/Jutarnji

Croatia hasn't done the best job of showcasing itself in the investment world, with investors often referring to it as the ''Bermuda Triangle'' and with the phrase ''ABC'' having come to mean ''Anything but Croatia'', things aren't looking all too bright. Things can be altered, but as the old British saying goes; mud sticks.

As Ana Blaskovic/Poslovni Dnevnik writes on the 16th of April, 2019, when compared to 2018, the share of companies that would reinvest in the Republic of Croatia dropped from 68 down to 54 percent. If they were asked to do so again today, almost half of the German companies operating here would decide against investing here again, and over sixty percent of those investors have an extremely poor economic picture of the country.

This is the result of a survey by the German-Croatian Chamber of Commerce conducted between February and April of this year among 150 of its member companies. In almost six years since joining the European Union, investors first had high expectations which quickly fell, but that was apparently somewhat expected. Following Croatia's accession to the EU, there was a period of transition in which investors were waiting anxiously and looking forward to seeing European practices come to life here, but that wasn't quite the case here.

Unlike former new member states of the EU who were given the green light to join during previous wave of the EU's enlargement, Croatia stalled, at least that is the overall impression one gets when asking members of the German Chamber of Commerce, including huge names such as Allianz, Siemens, Bauerfeind, Knauf, Müller, Spar, RWE...

"The survey is a perception, but it speaks about the overall impression of companies doing business [in Croatia], and that's that nothing important is changing,'' said Thomas Sichla, president of the Chamber. As stated, when compared with the previous year, the share of companies that would reinvest in the country dropped from 68 percent to 54 percent, which speaks volumes about perception and just how mud really does stick.

The fact that this isn't just an isolated case of pessimism, but is the contour of very worrying trends is best illustrated by the fact that eighty percent of the respondents had already previously responded to the survey.

While in Croatia almost half of investors would say "Auf Wiedersehen" to investing here again, in other countries in Central and Eastern Europe where parallel research was conducted, only one fifth of the companies who responded would say the same, so it shouldn't come as any surprise whatsoever that investments and their investors simply bypass Croatia entirely. Things aren't changing in Croatia, and if they are, it isn't fast enough at all.

Out of twenty Central and Eastern European countries, Croatia is still "relatively attractive" in eighth place on the list. Siemens' leader Medeja Lončar says that "more flexibility and speed in Croatia for a better economic and investment climate are needed", adding that Siemens will continue to invest in Croatia, depending on the business environment. If one scratches the surface, the companies that make up the German-Croatian Chamber of Commerce are almost repeating some very well-known criticisms that many have about Croatia.

At the top of that ''criticism list'' lies an insufficient fight against corruption and crime, followed by the burden of high taxes and general dissatisfaction with the tax authorities and the system despite the three waves of ''tax relief'' under Finance Minister Zdravko Marić. The top five barriers are Croatia's below par public administration and lack of legal security.

On the other hand, as a business advantage, investors pointed out the fact that operating in Croatia opens the door to the EU's single market and to infrastructure. Despite the ever-burning workforce problem that is rapidly evolving into an enormous problem of epic proportions for Croatia, employee qualifications and the quality of higher education continue to be among the main benefits in Croatia, are are productivity and employee motivation. However, in Germany the Chamber notes that the Croatian state should engage and talk much more to the private sector about the demand for labour and adapt its education system to that need.

With Croatia's continually deteriorating growth prognosis, which without reform is falling more and more, more than sixty percent of the surveyed companies find Croatia's economic environment to be very poor, and only a third claim it to be satisfactory.

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Click here for the original article by Ana Blaskovic for Poslovni Dnevnik

As Novac/Veljko Ostojic writes on the 8th of April, 2019, after almost a decade of high growth rates in Croatia's domestic tourism indicators, the dominant feature of this season, at least from the market's point of view, is uncertainty. The only thing we can be sure of, however, is the rapid growth period behind us. Facing Croatia is a period of struggle for each tourist owing to extremely turbulent broadcasting markets.

Such a destiny is shared by all Mediterranean markets with the exception of Turkey, and tourism in the Mediterranean as a whole is influenced by two dominant trends.

The first concerns the general insecurity in the European Union's economy, driven by the slowdown in individual national economies, primarily in big players such as Germany and Italy. An additional element that generates general uncertainty is the potential of Brexit (should it ever happen at all), the real effects of which at this stage can't really be estimated. These movements deter people from spending too much money, which is felt by the lack of bookings and reservations. In the first two months of 2019, the annual cumulative booking from Germany to Croatia was a little less when compared to 2018, while the decline in British tourist reservations throughout the Mediterranean was much more apparent, with Brits booking their holidays in the sun in advance being 10 percent lower on average than last year.

The second trend is the return of an old tourism king, Turkey, which has been a source of discomfort and nerves for Western Mediterranean countries, especially Spain, especially with its policy of subsidised travel arrangements last season, this season, Turkey is set to continue to record high growth rates of reservations from key European emission markets.

Such is an environment that defines the prospects of Croatian tourism not only this year, but over the next few years. The Croatian Tourism Association decided to quantify the effects of these trends on the expectations of Croatian tourist companies and the results of that survey were published in the first issue of Tourism Impulse, which will be published continuously every quarter. They surveyed the fifteen of Croatia's largest tourism companies, which account for 81 percent of the country's hotel sector.

The survey has shown that Croatian travel companies are experiencing revenue declines on one hand, and rising costs, primarily regarding labour, on the other. Croatian tourist companies are expecting slower annual revenue growth by 11.4 percent when compared to last year. Without changing the business environment in which Croatian tourism operates, this will result in a reduction in profitability and of course, a reduction in investment potential. With Croatia's damning reputation among foreign investors on the world stage, this really is the last thing it needs to seek to encourage.

The rather damp expectations of some of Croatia's largest tourist companies also show a drop in profitability this year by almost five percent and, as a consequence, the reduction of investments this year by a concerning twenty percent. Over the next two years, a further decline in investment is expected at a rate of 33 percent when compared to the periods in 2018 and 2019.

Reducing investment potential in tourism has a significant impact on the long-term prospects of Croatia's tourism. It is clear to all that in the long-term, Croatia must compete exclusively with quality rather than price. Reducing prices as much as possible to compete with Turkey on a surface level will only destroy the Croatian coast and Croatia's tourism sector as a whole. This isn't an option.

To be able to really compete with quality, apart from having determination to do so, it is crucial to attract and stimulate investments, something Croatia lacks in, and rather severely.

For that, Croatia will have to make numerous significant changes to its business framework. Today, Croatia is one of the least competitive in investing in tourism in the entire Mediterranean and has the highest tax burden of them all, especially if we look at the VAT rate. Spain, France and Italy have a reduced their VAT rates to help boost tourism. Croatias VAT rate, however, is 13 percent for hotel accommodation and 25 percent for hospitality services. Only Denmark is operating anywhere close to that in the whole of Europe, and one can hardly compare Croatia to Denmark.

Tourism directly and indirectly generates nearly twenty percent of Croatia's GDP, the sector generated eleven percent of all investments in Croatia. There is a lot of discussion about the optimal structure of the economy in which tourism makes up such a big part of it, and this, like many such discussions in Croatia, is often a waste of time. In a situation where tourism is experiencing significant growth rates and becoming an increasingly important factor in the receptive Mediterranean market, such discussions are quite unnecessary.

Of course, the priority requirement for Croatia's tourism growth is to boost investment, which will continually increase the country's overall quality.

If VAT on the entire tourist service is reduced to the level of Croatia's competitive countries, tourism can attract an additional three billion euros of investment, it can increase employee salaries by twenty percent and continue to rise over the next few years, which will further stabilise budget revenues and raise the standard life in Croatia in general.

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