Croatia Performing Poorly with Reforms, Tax Burdens Continue to Cripple

Lauren Simmonds

As Novac writes on the 6th of June, 2019, fiscal consolidation, investment and business barriers and the burden on the Croatian economy make things very difficult for business in Croatia, according to the results of HUP Skor for 2018, showcased by the Croatian Employers’ Association (HUP).

It is a tool to measure the progress of reforms in the twelve critical areas necessary for doing better business and improving life in the Republic of Croatia when compared to the EU 10.

As Gordana Deranja, HUP’s president, explained, “HUP Skor is an objective measure of how much we’re really reforming.”

Since the countries of central and eastern Europe progressed faster than Croatia last year, Croatia’s HUP Skor for 2018 is a rather embarrassing 36 out of the possible 100 points, and what continues to push Croatia to the bottom, as was stated by HUP, are taxes and similar burdens. The ratio of general government tax and social contributions to the GDP in Croatia is continuing to rise, and even now it’s exceeding the maximum achieved before the reforms in the tax system.

”Structural problems continue to pose a serious threat to adaptation to one of the next crises and permanently limit the speed of economic growth. Although we’re satisfied that [Croatia’s] GDP grew by 3.9 percent in the first quarter of this year, the fact is that this is still too little and we should be at least four percent more in the long run,” Deranja said.

“The Croatian economy is the most burdened and that’s reflected in its productivity. The economy is congested and has no power to grow,” she said.

In addition to the above-mentioned problematic areas in the Croatian economy, the encouragement of investment, productivity and competitiveness, the justice system and the labour market, education, health and pension systems continue to be ”in the red”.

”This year’s result suggests that Croatia is lagging significantly behind the EU member states from Central and Eastern Europe, and what’s particularly worrying is the fact that Croatia’s score is worse than that in countries which are less developed than Croatia, such as Bulgaria and Romania,” said Davor Majetić, Director of HUP.

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