Croatia’s Hoteliers Praise VAT Reductions, Speak of 10% Pay Rises

Lauren Simmonds

As Novac/Dora Koretic writes on the 27th of July, 2019, Croatia’s hoteliers welcomed the government’s recent decision to reduce VAT in the hospitality sector down to 13 percent, however, the owner of the large Bluesun group, Jako Andabak, wasn’t very impressed with these latest tax reforms, to say the least.

“Well, what can I say to you, I still don’t think they really understand tourism. Instead of thinking two steps in advance, they only deal with what suits them right now, instead of acting proactively. If they really wanted to help, they would have to look at the complete situation in tourism and define the VAT rate at an even lower level,” Andabak stated bluntly, and he further criticised the measures that the Croatian Government introduced for young people who get certain tax breaks at the ages of 25 and 30.

“And what happens then when that young man, after his 25th or 30th birthday, suddenly sees his wages drop? Who will make up for that? Probably the employers…” said Andabak, adding that the measure is a populist one, as well as the fact that in his opinion, there is absolutely no real value to it at all.

His colleagues from HUT, led by Veljko Ostojić, welcomed the latest tourism-oriented measures in their official statement, announcing immediately that the money they would get to keep through lower VAT rates would then be invested back into raising the quality of the facilities and overall offer, as well as increasing employee salaries.

“In an increasingly complex market game in the Mediterranean, the tourism sector needs to boost investment in the quality of tourism supply, because we can only compete with the environment we’re in with quality. Given that the consolidated net profit of the tourism sector in Croatia is less than six percent of the total income realised, only tax relief can release the funds needed to increase investment and raise salaries,” they said from HUT.

Tourism Minister Gari Cappelli said on Friday for Hina that hoteliers announced a salary increase of ten percent as soon as the reduced VAT rate comes into force. However, it has been stressed repeatedly that the raising of wages and leve of quality for staff lies with the employers, not with the government or its measures.

In reducing VAT on food preparation and serving, the main goal, in his words, was not cheapening the offer, but stopping the outflow of personnel and raising the overall level of quality. He recalled the research that shows that 30 percent of tourists visiting Croatia come for the country’s gastronomy.

The Minister of Tourism also highlighted the other two measures concerning tourism in the current tax reform sphere, and, according to his assessment, they went undetected all but fell below the media’s radar.

These are the non-taxation of the cost of accommodation and food for all workers, ie, those who live on the premises of their workplaces, as well as payments for holiday service workers during the off-season, which is known in the public as the “cro card” project.

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