ZAGREB, February 26, 2020 – Business conditions in Croatia are better compared to last year, but Croatia lags behind other countries in the region, show the results of an American Chamber (AmCham) Croatia survey on the business environment in Croatia, presented on Wednesday.
“Although a significant number of respondents rated their business experience in Croatia as average (43%), when compared to 2018, there is an increase of positive business experience in Croatia, which was 49% in 2019, as well as a decrease of the negative experience. Also, 52% of the respondents have noticed improvement of business conditions in the last five years,” AmCham Croatia Executive Director Andrea Doko Jelušić said while presenting the survey, which was conducted on a sample of 111 board members of domestic and international companies in Croatia, from 16 December 2019 to 13 February 2020.
The survey shows that 67% of the respondents assessed their business results in 2019 as positive, while 55% reported an increase in the number of employees.
“Indications for the future are also positive. Around 80% of the companies plan to expand their business in Croatia, while only 2% plan a possible reduction of business,” said Doko Jelušić, adding that around 71% of the companies planned to hire new employees in the next three years.
However, the survey shows that, despite progress, Croatia is lagging behind other countries in the region.
“Despite certain improvements in the assessment of the business environment, comparison with other countries in Central and Eastern Europe shows that half of the respondents rated business conditions in Croatia as worse than in other countries of Central and Eastern Europe, and only 13% considered them better,” said the AmCham Board of Governors President Ruža Tomić Fontana.
The respondents highlighted taxation of labour, lack of adequate workforce and high business taxes as the three main limiting factors for their business in 2019.
“During the last few years, we have seen four rounds of tax reform. It has somewhat surprised us that labour taxation is again high on the list of the limiting factors for business in Croatia,” said Doko Jelušić.
One has to take into account the fact that other countries have also worked on their business environment, Doko Jelušić said, mentioning that Romania and Bulgaria have labour taxation of around 10%, the Czech Republic from 20% to 23%, and Slovakia from 19% to 25%. Those countries are considerably more competitive than Croatia, which at this moment has an initial personal income tax rate of 24%, as well as the higher personal income tax rate of 36% on annual incomes of more than €48,000, she noted.
The respondents said the greatest disadvantages of Croatia compared to other countries in Central and Eastern Europe were the small size of the market, level of taxation and slow administration.
AmCham Croatia represents the business interests of over 250 American, Croatian and other international companies which employ over 88,000 people in Croatia.
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