Lower VAT rates on islands have been introduced in other parts of Europe. Could it work in Croatia?
Although during the last few years it has not been often that Greece is mentioned as a good example for anything, now, after even the Scandinavians have decided to follow the Greeks and seriously consider the idea of reducing the value added tax for the islands, the similar possibility is being discussed in Croatia as well. However, even now, when the idea is still very far away from reality, there are two important questions being asked. The first deals with effects of such decision on the daily life on the islands. The second question is whether this idea could attract serious attention of the Croatian political elite, reports Zadarski.hr on September 8, 2015.
“The Scandinavian countries are now launching the initiative which was started by Greece where the VAT rate on the islands was lower. They had tremendous growth, and even the retail sales surged because people from the mainland were coming to shops on the islands. If we want to do the islands good, we should definitely reduce the VAT on islands from 25 to 13 percent. Currently, very little of what the state takes through the VAT returns to the islands, and this would be a stimulus to the economy. That would also lower the living expenses on the islands where life is more expensive by 20-30 percent than on the mainland. People would more often decide to stay living on the islands”, says Denis Barić, president of the Island Council.
From the perspective of the economy, a decrease in VAT would bring some benefits. “It would certainly increase the competitiveness of our businesses, since on the islands we have to pay for all the services significantly more than on the mainland. However, we should be careful that the decrease in VAT should not become an extra income for supermarket chains”, says Marina Depolo, director of the fish processing company “Mardešić” on Dugi Otok.
In the scientific community, most researchers and experts on islands call for a clear and comprehensive strategy for the islands. “All the research and studies show that we need a series of systemic measures which will create improvements in the sustainability of life on the islands. We need a whole set of measures and strategies for sustainable development, since depopulated areas require special treatment. The VAT reduction would help, but by itself would not solve the key problems of our islands”, says Željka Tonković from the Department of Sociology, University of Zadar.
Mayor of Sali Zoran Morović shares her views. “If we were to introduce the lower VAT rate, that would at least be a small step forward. It would have a certain impact on investors and reduce the traditionally high costs of living on the islands”, says Morović. On the other hand, Morović notes that lower VAT on the islands would certainly not “empty the state budget”, however, he is afraid that a small number of voters who live on the islands would not be a large enough incentive for politicians to seriously consider the idea. They might think that it would be too much work for too few votes.
