When Croatia jointed the European Union back in July 2013, it agreed that it would eventually have to introduce the euro as its main currency as part of its accession to becoming a full member of the bloc. While many are concerned with the eventual introduction of the euro as Croatia's main currency, with a number desiring a referendum on the matter, it seems that Plenković is quite right when he says it's already a done deal.

The first official step in the process of sending the Croatian kuna to the history books has now been taken by the powers that be.

As Poslovni Dnevnik writes on the 30th of May, 2019, Finance Minister Zdravko Marić and Croatian National Bank (HNB/CNB) governor Boris Vujčić have requested that Croatia enter the Single European Banking Supervisory Mechanism, the first pillar of the European Banking Union, the primary duty of which is bank supervision, according to a report from Večernji list.

This is the first step of replacing the Croatian kuna with the euro, which could happen in five years.

The single supervisory mechanism is mandatory for all Eurozone member states. It is one of the last steps that Croatia has now taken before it officially requests the introduction of the euro as its main currency, abandoning the kuna, and entering into the European exchange rate mechanism, Večernji list writes.

Rather morbidly, this event coincides with the celebration of 25 years of the Croatian kuna, one of the few European currencies whose introduction is celebrated as a major historical and national event, yet in which citizens have little real confidence and in a country over which the euro still dominates.

While opposition among some members of the public remains strong, when it comes to savings and other financial practicalities of life, the euro has no competition in Croatia, just as German marks never did either.

If all goes well in not only Croatia but in the wider European Union ''family'', Croatia could introduce the euro during the year of the thirtieth anniversary of the introduction of the kuna - 2024.

If that doesn't occur, anything else could. It's possible that some of the sovereign and populist Croatian parties could seek and even succeed in launching a referendum, binding or otherwise, and convince citizens to reject the euro, which will force the government to stop the Eurozone accession process, but, that seems distant for now.

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The Chinese interest in Croatian projects is continually growing, or so it seems, and there is now room to dare when it comes to the potential Chinese rescue of Uljanik and 3 Maj at the eleventh hour.

As Marija Brnic/Poslovni Dnevnik writes on the 2nd of May, 2019, the Chinese CSIC representatives currently visiting Croatia to see the state of Croatia's ailing Uljanik (Pula) and 3 Maj (Rijeka) shipyards have expressed clear interested in new projects with Croatia's shipyards, but only if the Croatian state covers the cost of what has already failed, there have also been mentions of the diversification of production, but they don't want guarantees.

If there is an agreement between the Croatian Government and the Chinese CSIC about reviving Uljanik and 3 Maj, it will be done so with regard to a combination of the models which were discussed with the previous two strategic partners, Darko Končar and Tomislav Debeljak.

According to the explanation given by Minister of Economy Darko Horvat after the final talks and the three-day visit of CSIC's representatives, the Chinese are indeed interested in starting with new projects, while the state should cover the cost of old, failed projects, meaning it will need to take place on a clean slate. It's also more than likely that the sites of today's Croatian shipyards will see other projects developed there, that is to say, the diversification of activities will occur.

"If they don't see the possibility of continuity of shipbuilding at this time, we want other industries to take place here, and not just those exclusively involved in shipbuilding," Minister Horvat stated. Therefore, unlike Danko Končar's initial idea, Chinese diversification would not be a real-estate business, but would involve some sort of other, new production aside from shipbuilding. And the clean starting position the Chinese have indicated that they want, which is similar to what Tomislav Debeljak sought but is unlike his idea, almost certainly means declaring the bankruptcy of the two shipyards.

"We don't expect them to finance failed attempts to build ships that haven't been completed. The starting position means new projects,'' stated Horvat in reference to the wishes of the Chinese.

The continuation of construction in Pula and Rijeka in partnership with CSIC would in any case have a completely different financing philosophy. The Chinese say, after the talks, that they are completely astonished at the reliance of state guarantees for shipbuilding. To repeat what Finance Minister Zdravko Marić stated recently, it's much too early to talk about exactly what changes might occur in this context following their entry into Uljanik and 3 Maj. Over the next few weeks, CSIC's senior people will analyse the collected information and determine whether or not, and indeed in what form they're interested in entering into the structures of Croatia's enfeebled shipyards.

At this moment in time, Darko Horvat has merely announced that any form of Chinese entry would involve a new way of financing, with different sources, a different way of drafting project documentation, and would involve no state guarantees. After the final talks at Zagreb Airport, Horvat didn't provide any more specific information, nor the deadlines within which he expected to receive feedback from the Chinese, but he did appear to try to leave the impression that he was optimistic about the whole situation. The Chinese representatives themselves, however, didn't give any media statements.

Make sure to follow our dedicated business page for more information on Chinese-Croatian business relations, Chinese projects and investments in Croatia, doing business, working and investing in Croatia and much more.

Click here for the original article by Marija Brnic for Poslovni Dnevnik

As Poslovni Dnevnik writes on the 30th of April, 2019, Croatian Finance Minister Zdravko Marić said on Tuesday that he still needs to see if there really is specific interest from the Chinese shipbuilding company, whose representatives are visiting the ailing shipyards in Pula (Uljanik) and Rijeka (3 Maj), saying that it's too early to be able to say anything and that we "need to be completely realistic".

When aked by a journalist about the expectations of the Croatian Government, given that a delegation from the Chinese shipbuilding company China Shipbuilding Industry Corporation (CSIC) has visited the Uljanik and 3 Maj shipyards, Marić said that first of all, we should be realistic and after CISC's representatives get a proper look at the state of affairs with those shipyards and answers to the questions they are interested in, we will need to wait and see what their response to all of it will be.

At this point, it's still too early for that, he added, recalling yesterday's introductory meeting between the Croatian prime minister, his ministers and the aforementioned Chinese delegation at Banski Dvori in Zagreb, where everything was transparent and very clearly presented.

"A really high level team from the perspective of that company has arrived, but on the other hand, we need to be completely realistic. So, today they will spend all day in both Rijeka and Pula and then after that, of course, we can't expect it immediately but within a reasonable time frame, they'll determine what they saw, state what they think about it, and whether or not there is a certain level of interest,'' said Marić when answering journalists' questions after attending the annual European Investment Bank (EIB) press conference.

The CSIC delegation, headed by Hu Wenming, arrived at the enfeebled Uljanik on Tuesday morning, where talks with the members of Uljanik's management board and its supervisory board took place. Assistant Minister of Economy Zvonimir Novak has also been participating in these talks.

Several representatives of the aforementioned Chinese company arrived at Uljanik as early as Monday afternoon, where they viewed the plants and made an unofficial assessment of the capabilities of the Pula shipyard's production facilities, ie, they got better acquainted with its technical capabilities, the processes that take place there, the technology and its general capacities.

What will coe of the visit is anyone's guess so far, but despite suspicion from some, an injection of Chinese money could truly be Uljanik's very last hope.

Make sure to follow our dedicated business page for more information on Chinese-Croatian business relations, Chinese projects and investments in Croatia, working, doing business and investing in Croatia and much more.

As Frenki Lausic/Novac writes on the 20th of April, 2019, the Croatian Government's convergence program for the next three-year period has identified the pension and health system as the two largest structural risks, both of which are associated with the country's worryingly negative demographic trends.

This government assessment came at a time when trade unions are busy organising a referendum on pension reforms, as well as during a somewhat shaky period in which Zdravko Marić, the Croatian finance minister, said that Milan Kujundžić, the minister of health, is an excellent minister but that the Croatian health system with over seven billion kuna's worth of debt is unsustainable in an interview for N1.

When it comes to Croatia's concerning demographic trends, the program states that, when comparing the European Union and the Republic of Croatia, in the period 2016-2070, the remaining life span after 65 years of age will be extended by 6.4 years in men and by 6.2 years in women in Croatia, whereas in the EU, it will be 5.3 years more for men and 5.1 years more for women.

It has been stated that the life expectancy at birth in 2016 was 81.1 years for women and 75 years for men, which is less than the average for the EU, where the expected life expectancy at birth for women was 83.7 years, for men 78.3 years. However, data for the Republic of Croatia showed that life expectancy up to 2070 will be 9.4 years more for men and 7.8 more for women, while for the EU, life expectancy is expected to grow to 7.8 years more for men and 6 more years for women.

In this context, the results of the long-term projections for the Republic of Croatia for the period 2016-2070 show that without the calculated effects of the reform which came into force at the beginning of this year, pension expenditures from the first pillar should be reduced from 10.6 percent of GDP, which is what it was back in 2016, to 6.8 percent of GDP to the year 2070.

At the same time, transfers from the national budget to cover the deficit would gradually fall from the current 4.8 percent to about 1.2 percent of GDP by the year 2070. Expenditures for pensions from the second pillar should gradually increase to 1.6 percent in 2070, which means that overall retirement expenditures from the first and second pillars in 2070 would amount to 8.4 percent of Croatia's GDP.

Thus, looking at the situation macroeconomically, the pension system would remain viable, but with inadequately small pensions. That is why the government states that measures from the latest pension reform will increase pension adequacy and, accordingly, retirement expenditures in the first pillar.

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Click here for the original article by Frenko Lausic for Novac/Jutarnji

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

At the start of the enfeebled Uljanik's bigger problems, the Croatian Government's view was either restructuring or bankruptcy, and now there's no time to devise any sort of new solution.

As Marija Brnic/Poslovni Dnevnik writes on the 28th of March, 2019, the government rejected the offer of strategic partner Brodosplit for Uljanik's restructuring, and thus, although the prime minister tried to avoid actually saying it, a process that would have a domino effect on all the companies operating within the Pula-based group system was launched.

The fact that there is no longer a strategic partner for Uljanik, which was the main argument for the postponement of the opening of bankruptcy proceedings in the previous proceedings on the 3 Maj shipyard and Uljanik's other companies, is changing the situation and it is now clear that no matter how much room the government initially left for some possible new solutions, the judge in Pazin doesn't have much of a choice today and will determine that the conditions for declaring bankruptcy for the Uljanik shipyard are now fulfilled. Such a decision automatically withdraws what the Rijeka court stated and opens bankruptcy proceedings for the 3 Maj shipyard.

All the speculations that there could be another possibility for Uljanik, for which Prime Minister Andrej Plenković left space in his statement, are empty stories, not only because of the fact that right at the very beginning of Uljanik's growing woes, the government's position was that the only possible scenarios for Uljanik's rescue were restructuring or bankruptcy, but also because of the fact that now, there is definitely no more time available to come up with a new solution for the burdened shipyard. When it comes to the question of the possibility of the continuation of shipbuilding in Pula and Rijeka as a whole, the key question remains the same - how many ships could buyers actually be found for, and then arrive other questions regarding financing through bankruptcy.

Two ships that are now in their final stages of construction in Pula were de facto detained over the past few days by the company's emotionally exhausted employees, and Uljanik's workers aren't finishing the job, because "other" workers, not from that shipyard, are working on Scenic's polar cruiser, while Jan de Nul is awaiting the government's decision to pay the requested difference of 22 million euros and to take over and finish it in Trieste, Italy.

From Pula, the request was for the completion of construction to be carried out in Uljanik, but the government didn't even discuss that yesterday, so it remains unknown as to whether the Ministry of Finance has worked to meet the necessary conditions, and if so, when it intends to pay any price differences and deal with the issue of the contracted vessels.

Although it's quite impossible to describe the situation surrounding Uljanik and Croatian shipbuilding as a whole as anything remotely positive, its rather lucky, analysts agree, that all of this happened and seems to have finally reached its peak in a year in which a surplus was recorded, but that doesn't minimise the issues Uljanik faces, nor does it even begin to confront the shipyard's overworked and well and truly underpaid employees.

The interesting thing which always happens in Croatia is the intertwining of business and politics. Just like with the messy Agrokor situation that has dominated the Croatian media for the past couple of years, there is always a political element, and if there isn't really one, someone will make you believe there is. The Istrian Democratic Party (IDS) has accused the Croatian Government of purposely trying to cause issues by using the Uljanik saga to its benefit, even claiming that the ''government's lack of action and indecisiveness'' is an attempt to destabilise Istria.

Make sure to stay up to date by following our dedicated business and politics pages for much more.

Click here for the original article by Marija Brnic for Poslovni Dnevnik

ZAGREB, March 25, 2019 - The parliamentary Conflict of Interest Commission has decided to launch proceedings against Regional Development and EU Funds Minister Gabrijela Žalac and Finance Minister Zdravko Marić in cases involving a luxury Mercedes, a Croatian Reconstruction and Development Bank (HBOR) loan, and tickets for a Croatia-England World Cup match in Russia, Commission chair Nataša Novaković said after a meeting of the Commission on Monday.

"In the case involving Žalac, the Commission will see if there is a connection between the official's personal relationship with Šibenik businessman Josip Stojanović Jolly and the awarding of an HBOR loan to the businessman's company, the purchase of buses for the public transportation company in Split from the businessman's company, and the lease of a Mercedes car to members of the official's immediate family," Novaković said, adding that the Commission would determine if there had been any mutual favouring.

As for Minister Marić, she said, the Commission will determine the connection between the minister's personal relationship with businessman Stojanović and the awarding of an HBOR loan to Stojanović's company and the minister's travel to Russia.

"We will determine who paid for the tickets for the said game," she said.

As for Velika Gorica Mayor Dražen Barišić of the HDZ party, the Commission will inspect his declaration of assets in the part that refers to his salary and car.

Asked by reporters about officials' obligations with regard to car lease, Novaković said that officials were obliged to state car lease in their declaration of assets but that they did not have that obligation in the case of a short-term, month-long lease.

More news about conflict of interest issues can be found in the Politics section.

As Poslovni Dnevnik writes on the 26th of January, 2019, the low rate of taxation and the simplistic way of ''doing the books'' has apparently led to a large increase in people setting up obrts and freelancing in Croatia. Minister Zdravko Marić announced that the Croatian Finance Ministry will "consider this segment in particular and see how it will be treated in the future".

Judging by the discussions that took place at the 2nd Tax Conference, the next round of tax changes could be concentrated primarily on obrt owners and other freelancers, with the possibility of further lowering the tax burden on wages.

Minister of Finance Zdravko Marić announced that the Croatian Finance Ministry intends to alter a few things for Croatia's numerous freelancers, but didn't really specify in what direction those changes will go and when these changes will happen. It is to be expected, however, that the Croatian Finance Ministry will prepare the changes during the course of this year, according to a report from prviplan.hr.

At the Taxation Conference, organised by the Faculty of Economics in Zagreb and Deloitte, and was attended by representatives of the scientific and business community, representatives of the Croatian Finance Ministry and the Tax Administration, Minister Marić reported on the effects of the previous changes in the Croatian tax system.

Minister Marić reported that about 150,000 taxpayers in Croatia are paying tax on their earnings.

He said there are about 35,000 j.d.o.o's, 106,000 registered self-employed businesses, including 37,000 obrt owners. When it comes to private renters who pay a flat tax, there are about 95,000.

Commenting on the rapid growth in the number of obrts paying taxes on a flat-rate basis, Minister Marić said that the Croatian Finance Ministry has made a big step forward and simplified the management of the books, but that "this segment needs to be considered and it should be seen how things will look in the future."

Marić's announcement came after the introduction made by dr.sc. Hrvoje Šimović from the Faculty of Economics in Zagreb, who said that the growth of those paying flat tax now looks good, especially because of encouraging levels of those who are self-employed.

"But in the future, obrts will prove to be the biggest problem in regard to the tax aspect. The potential for abuse will increase due to taxpayers' efforts to make sure their net income remains as much as possible,'' said Šimović.

Minister Marić emphasised that the Croatian tax system needs to be fully understood and that the essence of tax reform is to make the system simpler, more predictable and consistent, offering a better sense of understanding and security for everyone.

"We're doing the same for all taxpayers. It's not true that we're only good for those who pay a lot of tax, and that we're purposely trying to make it more difficult for those who pay less. It's precisely in the segment of small and medium-sized entrepreneurs that the biggest reform has been made in the first round of [tax] reforms. The profit tax rate has dropped from 20 to 18 percent, or 12 percent for companies with up to three million kuna of revenue. A lot has been facilitated,'' Marić noted.

He stressed that he remains a big advocate for tax cuts.

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For some, the mere idea of the introduction of the euro in Croatia is enough to induce passionate debate. For others, the introduction of the single European currency is the next step to leaving the country's tumultuous past behind, and joining the ''ever closer union'' that Eurocrats in Brussels speak so highly of. While the United Kingdom managed to secure a way out of the currency's introduction much earlier, Croatia had to agree to take on the euro in order to join the bloc.

Introducing the euro in Croatia is likely to bring problems as well as solve them, but what use is the adoption of the single currency when many of Croatia's national institutions are in total disarray? Until state institutions can be brought into line, the introduction of the euro and the overhaul that involves will only work to contribute to existing issues, rather than help to solve them.

As Ana Blaskovic/Poslovni Dnevnik writes on the 9th of January, 2019, just over a year after the announcement of the Croatian Government's intention to introduce the euro, encouraged by positive signals from Europe, Croatia will send a letter of intent to enter the exchange rate mechanism (ERM) by the summer. The aforementioned mechanism is known as the ''waiting room" for a country's introduction of the euro as its currency. Although the letter is only the first formal step in the process of replacing the kuna with the formerly problematic single currency, its content is not merely a pleasant yet rather empty formality.

The letter will involve the Croatian Government agreeing on a series of concrete reform moves, in a relatively short period of about a year. "The ball is now in the government's court to make a list of moves that can be completed within a year, within the gauge that they're achievable, easily measurable, and are written in the letter of intent," an interlocutor close to the central bank told Poslovni Dnevnik.

Judging by the Bulgarian version of the letter that Sofia officially sent to a number of European Union addresses at the end of July, the answer to the question of what exactly Andreja Plenković's government could or should put on paper doesn't need great philosophical effort put into it. There is already a list of specific recommendations from Brussels for the Republic of Croatia.

Reforms is a word that everyone in Croatia gets sick of hearing, and this next political move involves a well-known series of infamous reforms, the implementation of which has been largely shifted to ''next year''. The euro in Croatia however, demands certain reforms be met, and sooner rather than later.

For example, there are administration reforms (including those regarding salaries), reforms to the utterly bizarre Croatian justice system, the establishing of a more just system of social benefits and rights, the strengthening of the fiscal framework, and the introduction of property taxes, a controversial idea which Plenković has moved around quite a lot on.

"The European Commission supports member states' efforts to introduce the euro, not only politically, but in also providing the necessary technical assistance and potential financial resources," said Valdis Dombrovskis, adding that Croatia is very serious in its intentions and is working intensively to meet the conditions for its eventual entry into the eurozone. One of the panelists at that conference was the Croatian National Bank's Boris Vujčić, which is also regarded by all as a firm sign of Croatia's support.

"The most difficult thing to do is to enter the ERM II, because there are no clear criteria that a country needs to meet in order to enter the exchange rate mechanism. Once you're in the ERM, the criteria for introducing the euro is clear, although some of it is constantly changing, so you do need a bit of luck on your side in order to be able to fulfil it,'' said Latvia's governer. One thing is certain, unlike the correspondence Croatia has had with the European Commission until now (primarily concerning becoming a member of the EU), the rules for a country's adoption of the euro are much stricter.

Make sure to stay up to date for more information on the intended introduction of the euro in Croatia and much more by following our dedicated politics page.

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