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 Croatia and the EU Accession Process

 

Croatian Taxpayers and Citizens Celebrate

Tax Freedom Day, June 10, 2010!

Dan Porezne Slobode

Nacional - Croatia's Independent Weekly Highlights 2010 Tax Freedom Day

Message from Natasha Srdoc

Today is Thursday, June 10, the 161th day of 2010 and there are 204 days remaining. Most importantly, for Croatia's taxpayers and citizens, today is the first day that Croatia's citizens and taxpayers stop working for the government and finally begin working for themselves!  It is cause for celebration.

Croatia's value added tax (VAT) of 23% is the highest in all of Eastern Europe. 

Hence, nearly every quarter of the purchases that Croatia' citizens or businesses make - goes directly to Croatia's government.  Moreover, for ordinary Croatians, paying taxes to a government tarnished by political corruption and elected officials amassing vast amounts of unexplained wealth is most troublesome.  Government fraud and waste abounds in Croatia.  Fixed tenders and a non-transparent government is intolerable.

Croatia's business tax is more than double when compared to the low-flat tax nation of Montenegro which taxes businesses at 9%.  Most of SE Europe have much lower business taxes and Croatia's marginal income tax rate is also the highest in the region.

Croatia's government is making a meager attempt at initial tax changes which we believe will not contribute to increasing the nation's economic growth or attracting investors.  Croatia's business climate remains uncompetitive - a great loss for Croatia's hardworking citizens and its youth.

In India, workers enjoy their Tax Freedom Day in March and in the countries of Australia, Estonia and United States, taxpayers celebrate their respective tax freedom days in April.

For Croatia's citizens, it is difficult to spend nearly half a year working for unreformed government. Croatia's taxpayers are faced with inefficient government services, a deplorable health care system run by the state and poor services in many fields including an educational system in decline.

Croatians are clearly frustrated and the best option is to vote for pro-reform oriented leaders during the next election cycle. Demanding lower taxes and electing those that commit to implementing real tax reform - lowering taxes, eliminating tax loopholes and making it more simple and transparent is the best way forward.  It is time for Croatians to hold their elected representatives accountable.

Croatia at a glance:
 
  • Croatia’s citizens total tax burden reached 43.7% of GDP in 2010
  • Croatian taxpayers worked 160 days for the spendthrift Croatian government and on June 10, they start working for themselves.
  • Compared to the previous year, Croatia’s taxpayers are working 8 days less for Croatian government in 2010 - due to the fact that they were not able to bear higher tax burden.
  • Economic downfall in 2009 (-5.8%) continued in 1Q10 (-2.5%) whereby diminished economic activity resulted in increased unemployment (currently 18%) and reduced personal and household consumption which led to the reduced tax revenues from VAT, income tax, corporate tax and social contributions. 
  • Croatia's government needs to radically reduce government expenditures. Croatia's government recent decision to reduce the marginal income tax rate from 45% to 40% and reduce number of brackets is a very small step to address the growing challenges; however, it is insufficient. With the government's stated aim to cancel all tax exceptions and deductions, the ensued, much broader tax base allows for significant reduction of the income tax rates and adoption of the low flat tax rate. If the government does not further reduce the tax rate, its objective will be to increase government expenditures and finance them through the increased tax revenues of this "tax reform".
  • Although the EU established a minimum VAT rate of 15%, Croatia's 23% VAT is among the highest in Europe - only Denmark and Sweden have higher VAT of 25% respectively.
  • Croatia's 20% corporate income tax is the highest in south eastern Europe. Serbia, Macedonia and Albania have a 10% corporate tax rate and Montenegro has the lowest tax at 9%.
  • Croatia's 40% marginal income tax rate is the highest in eastern Europe.
  • While 275 million citizens of eastern Europe live in flat tax nations, Croatia continues with a highly progressive tax system.
  • Croatia's government lives beyond its means which is obvious from a growing budget deficit (estimated at 3.6% in 2010) and continued growth of public debt (currently at 41% of GDP; at 60% of GDP including the guaranteed debt) which is an unsustainable trend.
Croatia’s Tax Freedom Day - Dan Porezne Slobode was calculated by The Adriatic Institute for Public Policy. 
 
Today, we celebrate with every Croatian citizen and taxpayer.  Happy Tax Freedom Day Croatia! 

Croatia's independent Nacional  - leads the way in reporting on Croatia's Tax Freedom Day:

10.06.2010. / 16:49 - Gospodarstvo

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