The Adriatic Institute for Public Policy and International Leaders Summit's (ILS) Board of Advisors, Leadership Board and renowned world economic experts have announced the ILS-Seven Strategic Recommendations for Economic Growth specifically to Croatia's Government leaders.
1. Tax Reform - Implement and Adopt the Flat Tax with a maximum of 19% rate for personal income tax, 19% corporate tax and 19% VAT (PDV). The increasing tax competition - specifically successful efforts in reducing tax rates in the region from Slovakia to Serbia have placed Croatia at a major disadvantage in competing for foreign direct investments, creating jobs and focusing on economic growth. Other nations in the region are considering the Flat Tax including Slovenia, Hungary and Romania. The Government needs to raise money in the most cost-effective, simplest, least discriminatory, least distortive and most efficient way. There is no time for delay. This must be a high priority initiative of the Croatian government to implement the Flat Tax!
2. Privatize Rapidly and Deregulate - Actively privatize state owned companies through a transparent/integrity based process and disengage from "public-private partnerships" in the areas of tourism and real estate which clearly indicates avoiding privatization and increasing the possibility of corruption. Deregulate industries to avoid monopolies and non-competition. If citizens want more innovative, less corrupt, better managed companies which are more open, employ better measures, invest more for the future, are less strike prone, bring you more choice with higher quality and a better price - then rapidly privatize!
3. Labor Law Reform - Reduction of employer/employee contributions for pension and health care from the high of over 100% to less than 40%. It is necessary to allow liberalization of the labor market through relaxing employment protection which leads to increased employment. Flexible labor market is essential to attract foreign direct investments and to encourage local entrepreneurial initiatives.
4. The Rule of Law and the Protection of Property Rights - Focus on expediting the more than 1.5 million back-logged cases and work toward a trusted national land registry initiative. Protection of Property Rights is vital to foreign direct investments and domestic entrepreneurial and individual initiatives. Rule of Law and Protection of Property Rights are essential foundation for future prosperity. Croatia should invest resources in fixing this problem, which is major barrier to entrepreneurial and personal initiative.
5. Allow Free Trade and Competition through eliminating tariffs and non-tariff barriers. High level of protectionism through non-tariff barriers: quotas, strict testing, certification (score based on Index of Economic Freedom by The Heritage Foundation/Wall Street Journal worsened from the last year) which impedes free market competition.
6. Eliminating Corruption - Croatia's leaders should implement a "whistle blower" initiative to report state-run businesses and state-government offices' abuses and corruption - which over the years has been a major loss to Croatia's taxpayers. This initiative should reward responsible individual citizens that report on corruption and to further strengthen laws against corruption, criminal capitalism and state-bureaucratic abuses. Corruption increases the cost of doing business, brings uncertainty and impedes economic growth.
7. Reduce Government Bureaucracy - Eliminate ineffective government programs and agencies. Begin a concerted and serious effort to reduce state expenditures through dismantling redundant agencies and eliminate outdated and ineffective programs. The Croatian government should place a moratorium on creating any new agencies or government programs. Increase e-government initiatives and web based delivery of public services.