ZAGREB, 3 Jan 2022 - The value of fiscalised receipts issued for all activities last week recorded an increase of 39% compared to the corresponding week last year and up 6% from the corresponding week in 2019, the Tax Administration reported on Monday.

In the week of 27 December 2021 to 2 January 2022, the value of fiscalised receipts for all activities amounted to HRK 3.4 billion (€453 million), which is HRK 964.2 million or 39% more than for the comparable period a year ago.

At the same time, the number of receipts issued was soared by 48% to 35.2 million receipts.

Last week 21.5 million receipts were issued in the retail sector and their value amounted to HRK 2.4 billion. The number of receipts issued in retail and wholesale, motor vehicle, and motorbike repairs also jumped, by 24%.

(€1 = HRK 7.5)

For more, check out our politics section.

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)

Croatian taxpayers are financing new expensive Audis for three parliament vice presidents. The monthly payment for each car equals the average Croatian citizen’s take-home pay. The brand-new cars were delivered in December 2019, came with 60-month contracts and a monthly installment of 5541 HRK (744 EUR) per car.

Three of Five Vice Presidents Accepted Audi A6

Three of the five deputies in Croatian Parliament accepted and are driving brand new Audi A6 cars, the Croatian Parliament press office confirmed to Hina. The new cars were offered to four vice presidents, as Božo Petrov (Most) had refused an offer to use an official car earlier.

Željko Reiner (HDZ), Furio Radin (NZ) and Siniša Hajdaš-Dončić (SDP) accepted state-funded Audi 6 luxury cars.

Three Vice Presidents accepted the luxury cars: Željko Reiner (HDZ), Furio Radin (NZ) and Siniša Hajdaš-Dončić (SDP). However not Milijan Brkić (HDZ) kept a previously financed Škoda Superb. Unofficially, Brkić will continue to use the official Škoda Superb, rejecting the new official Audi A6, a model purchased for the vice-presidents less than a year before the end of their terms, according to Novi List on January 15, 2020.

Petrov Does Not Want to Spend State Funds on Most

"I do not want to spend the financial resources of the state, or of all taxpayers, for Most’s party needs," explained Petrov, the only vice-president of Parliament who is also his party's president, in his official car waiver. The official car, he says, was returned a year ago, in January 2019, at the beginning of the European Parliament election campaigns, and he maintained this position during the presidential election campaign.

Božo Petrov (Most) refused Audi A6 and Milijan Brkić (HDZ) will keep state-financed Škoda Superb.

"It makes no sense for me to go around the country in a car which belongs to the state, and use it to promote the objectives of Most," Petrov said explicitly.

Parliament has not revealed the cost of the cars. However, they confirmed that the new cars were delivered in December 2019 after 60-month contracts were signed with a monthly installment of 5541 HRK (744 EUR) for each car. Multiplying the monthly payment by 60 months totals 332,460 HRK (44,654 EUR) for each car. Multiplying that total by three comes to a 997,380 HRK (133,961 EUR) bill for Croatian taxpayers to provide Reiner, Radin and Hajdaš-Dončić with luxury cars.

Vice Presidents Not Asked Before UZOP Audi A6 Procurement

The parliament deputies were not consulted before the new cars were purchased according to the press office statement. And parliament itself does procure them, nor does it manage the fleet for its own needs or those of parliamentary officials.

"These affairs are the responsibility of the Ureda za opće poslove Hrvatskog sabora i Vlade (Office for General Affairs of the Croatian Parliament) and the Government, which also manages the transportation for parliament officials, the government and all its offices, as well as the transportation of foreign delegations and protocol programs," the parliamentary press office explained regarding UZOP duties.

From 2014 to March 2019, UZOP had a “certain number of vehicles” at their disposal which were leased to serve the needs of users and the beneficiaries. These vehicle procurements are based on a public procedure and conducted by the Središnji državni ured za javnu nabavu (Central State Office for Public Procurement) and the framework agreement effective 2013.

In 2018, one year prior to the expiration of this contract, UZOP reported the need to procure new cars through financial and operational leasing to the Central State Office. They specified the car classes prescribed by the government and parliamentary decision on the conditions of use for official cars, mobile phones, etc. and guidelines for fleet management.

According to the decision, the vice presidents of the parliament have a right to use an official upper middle-class passenger category auto, according to the parliament statement regarding the length and details of the car procurement process.

Škoda Superb with a 202,343 HRK (27,178 EUR) price tag.

UZOP Purchased 18 Škoda Superb Autos for Croatian Parliament

Since the public procurement procedures for new vehicles were not completed by end of March 2019, and the older purchased autos under previous contracts had to be paid off, several cars were rented for the interim. Those rentals ended on July 15, 2019 when 18 middle-class Škoda Superb cars were purchased with financial leases.

The parliament press office stated that the complete procedure for the procurement of cars, 27 different classes in this case, was according to regulations, to serve the needs all institutions under the jurisdiction of the UZOP and the Central State Office, which provided the technical specifications for the required car classes (engine power, accessories, etc.)

The Central State Office reviews and evaluates the tenders, makes the selection, and then concludes the framework agreement. Neither parliament, UZOP, nor future users of official vehicles influence this process, the press office emphasizes.

New Audi 6 Cars Shipped in December 2019

The procedure for procuring the Audi A6 cars was published in the Narodne novine (Official Gazette) on September 18, 2018, the car selection decision was made on May 2, 2019. The vehicles were delivered in December 2019.

Follow our Politics page to keep updated on the brands and models of taxpayer-funded cars that top Croatian government officials are driving.

On Thursday evening January 2, 2020; HRT (Croatia Radio Television) moderated the second of three debates between presidential candidates Croatian President Kolinda Grabar-Kitarović and former Prime Minister Zoran Milanović.

During the two-hour debate, the candidates answered 40 questions – which were divided into several groups including the economy and demographics, foreign policy and presidential powers, national security and the fight against corruption. Of course, there was a set of questions pertaining to worldviews and personal questions, as reported by Index on January 2, 2020. Here are a few highlights from last night’s debate:

Candidates’ Opening Statements:

Milanović: I am aware that I need to reach out to people who don’t intend to vote for me in the second round. I will defend the constitution and fight for the rights of all citizens. I will fight corruption, the monster which has consumed Croatia. The present government and president do not understand the difference between the public and private. Nor do they understand what it means to fight corruption. Those who break the law will not get any preferential treatment from me.

Kolinda: As a woman, I broke through the glass ceilings in the world. I was the first woman foreign minister, have important world connections and was one of the first presidents to meet Trump. I will move away from ideological issues.

Entrepreneurs are complaining about high taxes. Are they too high?

Kolinda: The tax burden is too great. I do not want to please everyone, otherwise I would say what everyone wants to hear, and I am already too controversial. Zoran Milanović's government raised the VAT from 23 to 25 percent, which was a big blow. I am in favor of reducing taxes because that is the only way to secure higher salaries, create new jobs, investments and encourage people to stay. I will advocate for higher take-home wages and higher wages for employees.

Milanović: You are saying this to please everyone. Life is not like that, and it’s easy for someone who has never earned anything on their own. It is expensive to finance state obligations; including education and care for the elderly. Increasing the VAT rate during the recession was not a blow. Prices did not rise, so that thesis that does not hold water.

Kolinda: I’ve been working for a living since my third year of college. You addressed the deficit by increasing the VAT. I won’t allow you to downplay this failure because it was the VAT that impoverished our citizens. You had a budget deficit with a higher VAT. You can’t rely only on taxes to finance the state budget.

Milanović: How else would the budget be financed? From exports? This shows complete ignorance of fiscal policy.

How do we bring young people back to Croatia?

Milanović: The exodus began in 2016. Poland, Romania, Lithuania had the same problems after joining the EU. Did it destroy those states? As far as I know it did not. We are having moral panics in the Republic of Croatia. We are here, we will fight, we will survive, and they will return. I cannot blame either Milanović or Kolinda for the exodus.

Kolinda: The exodus began during the Milanović government due to pre-bankruptcy settlements and enforcement law. I'm not having a moral panic.

Milanović: Thousands of jobs were saved by pre-bankruptcy settlements, it's ridiculous to say that this is the reason for the exodus. Please don't embarrass yourself.

Kolinda: The fact is that pre-bankruptcy settlements benefitted your friends.

Who is Croatia's biggest ally?

Kolinda: It's the US and we are currently working on concrete proposals.

Milanović: Ms. Kitarović accomplished nothing when she was Croatian ambassador to the United States. You must be totally lost if you are claiming that the United States is our greatest ally. If the US is our closest ally; we are certainly not theirs. The current administration is what it is, and I don't want to fault them, but the EU is our biggest ally and the largest agent of peace in the world.

Kolinda: Of course, we are working with all EU countries. Let’s allow Milanović to highlight some of his achievements with Germany. Croatia is thinking about Croatia today, but is acting globally.

Milanović: I’m not out camping, I’ve worked, traveled, and hung out with the Scandinavian elite. Kolinda was an ambassador to the US and fled to NATO.

Kolinda: I've never turned my back on Croatia. Seventy percent of our foreign trade is with the EU. It is very important for us to work with Serbia and Bosnia and I want them to join the EU. But Milanović quarreled with all our neighbors. Where I build, you destroy.

Milanović: I'm glad to hear these phrases. Relations with neighbors have been the most corrupted by Kolinda. Now we only have a good relationship with Orban (Hungary). As for migrants (backed up at the border with Serbia in 2015); if we hadn't arranged for them to be transferred to Germany, those people would still be here with us now.

Kolinda: You caused that incident, you closed them off in Serbia. 

Do Jihadists in Bosnia pose a threat to Croatia?

Milanović: I believe SOA (Security and Intelligence Agency) is doing its job. Jihadists in Bosnia are a reality. Standard law enforcement measures will not help the situation there. Kolinda has damaged relations with a country with a Muslim majority due to her reckless stories.

Kolinda: I have don’t have any problems with Muslims. I didn't ruin the SOA; I don't interfere with their work. 

Milanović: Kolinda hangs out with people who steal. I'm not saying she's stealing, but she's a serious problem for the system of national security.

How would you detect and prevent corruption?

Milanović: Saucha (former assistant to Milanović) has been indicted, and he now supports Kolinda and the HDZ. Kolinda arrived (to the debate) today from a celebration held by (Milan) Bandić - these messages are dangerous and toxic.

Kolinda: I did not come from a celebration. I was at an event held by a party which supports me comprised of individuals who support me.

Bandić has been indicted in several court cases. Why would offer to bring him cookies?

Kolinda: Bandić is innocent until proven guilty and I will fight for that. Let's not put people on a pillar of shame. Let's not forget Lovrić-Merzel (SDP), and you defended Bandić when he was your friend. Would you pardon Perković and Mustač (Yugoslav Secret Police)?

Milanović: I would not pardon anyone. You are talking to me about corruption. I have a letter here that you sent to the Washington Times praising Sanader before he fled justice. 

Kolinda: I had no idea about Ivo Sanader's corruption. After all, he had dismissed me from the government.

Should the Croatian army withdraw from Afghanistan?

Milanović: Yes, immediately. It's been 16 years and it’s obvious that the Americans are not even clear on what to do there.

Kolinda: There has been one (Croatian) death since 2003. We will act as a responsible ally with NATO. My guess is that this process will begin sooner rather than later, and we will discuss it with our allies. Then, we will shift most of our forces to Eastern Europe.

Milanović: We are open to discussion, but we’ll make the decision. The soldier who died had his picture taken with me and asked me not to post the photo because he was still a specialist. A few days later, Kolinda posted a photo with that soldier. I would never manipulate people like that. 

Kolinda: That’s false. The soldier waited for an hour at Ovčara to have his picture taken with me. He never asked me not to post that photo.

What do you think about the adoption of children by same-sex partners?

Kolinda: The adoption and foster care application process is very difficult in general, and we need to make it easier. Children need both a mother and father; I do not know if we are ready for the adoption of children by same-sex couples.

Milanović: That is a process which is unstoppable. We need to talk about it, accept it and understand that these trends are unstoppable. And there is a human element to this topic.

How much have your personal assets grown during your five-year term?

Kolinda: I don't know exactly. I’ve put everything in my asset statement. This year, I received a severance from NATO of around one hundred thousand euros. My husband and I live off our wages.

Milanović: That's nice when you get such a large severance pay. At the beginning of your term you had a loan of more than one million HRK. And that was paid off with what money?

Kolinda: I obtained a loan in 1995 with a 4.5 percent interest rate. I had to take out another loan in at a full (interest rate), but that loan was paid off in two years by selling some smaller apartments. How did you get the 180,000 EUR loan at a preferential interest rate?

Milanović: You are making things up again and everything you say is wrong again. This is public information. I was not the prime minister at the time. And, it was a loan for 300,000 EUR with a 6 percent interest rate. I paid back the first portion by selling our first apartment. Not only is this defamation, it is nonsense. At the time of Operation Storm, you got a loan with a 4 percent interest rate when everyone else’s loans were at 14 percent.

Kolinda: Yes, I got that loan as a Foreign Office employee. It was the minimal amount of credit, because I could not afford to borrow more. I paid it off. I’ve worked for all the money I have.

Milanović: That was credit available HDZ guys. You worked for that? It's unfair, dishonest and immoral…

What did Kolinda mean when she talked about the coup?

Milanović: In 2015, Kitarović formed her government, after only 40 days of consultations with (Tomislav) Karamarko which went on behind my back. She was doing her best to undermine the center-left government.

Kolinda: In the first two years of my term, two rounds of parliamentary elections were held. I absolutely stand behind my claim that I maintained the stability of the state and did everything according to the constitution. There was a possibility of having a transitional government if one did not form within a reasonable time period. 

The constitution provides for a 60-day window, so I consulted with constitutional lawyers and the Constitutional Court. I was told that this lengthy procedure would have to be completed because the Parliament would find themselves in constitutional crisis if their mandate expired. I never appointed any government and please don’t slander me. Find the evidence!

Milanović: Of course, you didn't leave any tracks, but people are talking. Sue them if they slander you. Personally, I will respect the constitution. And, (Vladimir) Šeks is a constitutional expert?

Kolinda: Šeks had nothing to do with it, and there weren’t any secret negotiations. You wanted a coup, so you barricaded yourself. Furthermore, you sent me a text message which read: “today you can be a stateswoman and appoint a government or you can give Karamarko control and be his puppet.”

Milanović: That’s defamation, I would never send that kind of message.

Closing Statements:

Milanović: In a few days you will elect a Croatian president. I am here to serve you, not to divide you, to fight against what antagonizes our people, for which they are losing the will to live and stay (in Croatia). Demographics are most successful if a country has fair leadership. For years, we have been led by people who are not fair leaders, but who have networked by formal and informal means. We have a president who hangs out with unworthy people, and a government which has fallen apart because of corruption. This is sending a terrible message. Nothing revolutionary will happen (if I become president), but we believe in making small shifts.

Grabar-Kitarović: When I took office five years ago, Croatia was on its knees because of the disastrous policies of Zoran Milanović, the worst Croatian Prime Minister in history. We have achieved growth which is not yet adequate. I want the GDP to be above five percent, and that positive factors impact your lives and financial obligations. We must stop young people from leaving and complete the process of education reform. We need to encourage entrepreneurship, create jobs, increase wages and pensions, and raise the standard of living. I am interested in our country, not party politics. I unite, rather than divide. My Croatia is a Croatia for everyone.

The presidential candidates will meet for one more debate before the election. Tonight (Friday January 3, 2020) at 20:20h, they will face off on Nova TV.

Follow our Politics page for news on the upcoming presidential election in Croatia, which will take place on Sunday January 5, 2020. We will be providing by-the-minute exit poll results and final election results after the polls close at 19h Central European Time (CET).

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.

Make sure to follow our dedicated lifestyle and business pages for much more.

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.

Make sure to stay up to date by following our dedicated business page for more information on doing business and investment in Croatia.

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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As Darko Bicak/Poslovni Dnevnik writes on the 27th of March, 2019, the president of the board of EY Croatia talks about the state of the country, the challenges and perspectives of the Croatian economy, and the need to promote successful stories, which they push forward through the Entrepreneur of the Year event.

Even though it has nominally existed for thirty years in the market economy, it's still necessary to properly promote entrepreneurship and entrepreneurs in the Republic of Croatia, and for this reason, the global consultancy company Ernst & Young (in Croatia, EYCroatia) is organising, for the fifth time in Croatia, the Entrepreneur of the Year project.

Why it's still necessary to promote entrepreneurship and what the general situation is with the prospects of the Croatian economy was discussed by Berislav Horvat, the president of the board of EY Croatia.

All analyses of the Croatian market show that the lack of workforce is the main challenge of Croatia's economic development. Do you see this as a short-term challenge that will, more or less, be resolved relatively quickly, or as a factor that will have more and more of an impact on the structure and development of the Croatian economy?

The labour shortage is definitely one of the major challenges facing the Croatian economy. The problem is no longer financing and a lack of capital, but just a lack of a workforce entirely. This problem will not be resolved that quickly and will represent a limiting factor for further business growth.

Although entrepreneurs and companies operating in Croatia mostly do have growth plans, the lack of a workforce could be a key obstacle. This applies to companies in various industries, from tourism and hospitality, construction and industrial production, to the IT sector.

Have other countries in ''New Europe'' encountered such challenges, and how did they solve them, or are Croatian specifics at play here, too?

Croatia isn't an exception here. Other European countries have been met with the same problems, where people were emigrating, but with growth and development, the demand for labour increased, so wages rose, which led to people returning. For us, the most important thing is to create a stable business environment that will enable entrepreneurs and companies to invest because that's a prerequisite for further employment.

On the side of the state, it's crucial to further reduce income tax and abolish the highest tax rate. This would increase the net salaries of employees, Croatia would become more attractive, and those who left Croatia would have a reason to return to it. I believe that wage growth in Croatia is a key factor that will affect the return of some of the people who have left.

New technologies, the so-called 4.0 industry, is increasingly affecting the global economy. Where is Croatia there?

We've noticed that in Croatia, companies are increasingly investing in digitisation. We, with a lot of companies, are working on a digital strategy to improve business or cost savings and this is definitely the direction in which companies need to develop. We hope that we'll soon be able to see the results of the announced state-level measures related to the digitisation of public administration, for example, the digitisation of the process of opening up companies.

How did 4.0 reflect on the work and client requests in consulting companies such as yours?

Clients are quite interested in what's going on abroad and how outsourcing companies are dealing with digitisation and the challenges it brings. They're looking for examples and the best practices. We adapted to the market situation by bringing an entire digital team to us last year. Now we can respond to market demands and provide a more rounded service.

In addition to advice, we can offer the implementation of complete digital solutions. This means that in addition to the tips of digitising today, we also provide a service for designing and programming web pages and other digital content. Clients are no longer just looking for advice, but a full service, which allows us to be innovative.

EY is organising the fifth EY Entrepreneur of the Year project. How has this program influenced the perception of entrepreneurship in Croatia and what benefits are there for participants, especially for the winners?

A lot has changed in these five years since we started the program. Before that, there wasn't much talk about entrepreneurship, startups and other interesting topics [we see] today. I believe that by putting out good entrepreneurial stories to the public, we've contributed to this shift in focus and helped our entrepreneurs become more socially accepted.

By participating in the program, entrepreneurs are given the opportunity to present themselves, their businesses and their successes, while the winner of each year is taken to Monaco in June to the world selection of EY Entrepreneurs of the Year. In those five days of various events, the entrepreneurs can connect and exchange experiences and gain a unique opportunity to present themselves to the whole world.

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Click here for the original article by Darko Bicak for Poslovni Dnevnik