Tax Reform Especially Burdening Rural Agriculture and Tourism

Total Croatia News

“At this rate of introduction of compensation measures, there won’t be anyone left to make use of them,” said Janko Kezele, Deputy President of the Rural Tourism Association of Croatia.

The Rural Tourism Association of Croatia has called upon the government of the Republic of Croatia, specifically finance and tourism ministers, to fulfil two promises of compensation measures given at the end of 2016 at the time of a VAT hike for the catering sector: reduction of parafiscal levies and introduction of a CRO card.

“We are gravely expecting compensation measures, with over a year since they were announced. We salute the positive effects of the so-called comprehensive tax reform on the stability of the state budget and reduction of budget deficit, but macroeconomic indicators cannot be the only criteria of rating their efficacy. Effects of reform on rural tourism are especially negative. Some of our colleagues have decided to reduce agricultural production and lay off workers in order to leave the VAT system. Those still in the positive are forced to give up on investments and development. Unfortunately, there are examples of facilities closing due to negative balances with current fiscal and parafiscal levies. Some are even leaving Croatia, an additional blow to demographics in the rural areas,” pointed out Jasmina Rakić Horvat, Association President at the end of the 2nd association assembly held on January 18, 2018 in Čazma.

In admonishment, ministers promised compensation measures in the form of a CRO card and reduction of over 200 parafiscal levies in these sectors. Other than the publishing of a Non-tax Levies Register in the beginning of 2017, there are no indications when the promised compensation measures might be enacted. In terms of a business environment, Croatia is currently 114th out of 136 places of the World Business Forum competitiveness index for travel and tourism in 2017, and in terms of price competitiveness in 100th place, overwhelming for the development of tourism, especially the continental kind.

“Despite last week’s announcement by the Prime Minister on VAT reduction, our sector does not have the time to wait several years. Compensation measures must be in force as soon as possible in order to alleviate negative effects of tax reform, especially in rural areas which do not depend on the tourism season and foreign guests. If the VAT is eventually reduced, we hope it will be in accordance with the Croatian Tourism Development Strategy by 2020. The document was enacted by the Croatian Parliament, providing for VAT in tourism and catering below 13%, as is common in competitive states. Another announced compensation measure is the CRO card, which would significantly entice domestic tourism spending. Another unfulfilled promise. Continental and rural tourism do not have time to waste! At this rate of introduction of compensation measures, there won’t be anyone left to make use of them,” said Janko Kezele, Association Deputy President.

The Rural Tourism Association of Croatia is the only national vocational association bringing together service providers in rural tourism in all of Croatia. Resolution of legal issues and promotion of rural tourism are the main goals of the Association founded in 2016.


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