The American Chamber of Commerce in Croatia organized the fourth edition of the conference on the topic of a sustainable tax system. The conference centered around a discussion on ways in which we can create an efficient and fair tax system that would support the growth of the economy and the retention of human capital and eliminate obstacles to cross-border investments within the single market.

Andrea Doko Jelušić, Executive Director of AmCham, pointed out that AmCham first issued its position “Recommendations for the Tax System Reform” in 2018. This year, AmCham issued the seventh version of the document, which proposes recommendations each year for better functioning of the tax system and reduction of the tax burden. “We are extremely pleased that our tax recommendations have been recognized by institutions, the business community and beyond,” stated Doko Jelušić.

In its “Recommendations for the Tax System Reform in 2024”, AmCham proposes three key measures in the short term:

• Increase non-taxable personal deductions to EUR 840;
• Increase the higher income tax rate threshold to EUR 5,000 per month;
• Apply the maximum monthly and annual bases in the calculation of healthcare insurance contributions.

In the medium term, AmCham believes that reducing the income tax rate from 20% (i.e. 15%-23.6%, depending on the city/municipality) to 10% and the higher one from 30% (i.e. 25%-35.4% depending on the city/municipality) to 20% would have an additional strong positive impact on the Croatian economy and would increase the purchasing power of a large number of workers.

An additional reduction of the tax burden on labor would make Croatia more attractive for opening regional centers of international companies. In this way, according to AmCham, Croatia would position itself as a regional center, with EU membership and its geographical location as contributing factors, along with the membership in the Eurozone and the Schengen Area from 2023.

“In accordance with our strategic decisions, we are continuing with the reduction of administrative and tax burdens this year as well. Since 2017, we have reduced the tax burden on the economy and citizens by over EUR 2 billion annually. With just the latest changes in tax regulations, which came into force at the beginning of this year, a record reduction of the tax burden amounting to more than EUR 400 million was achieved. We will continue to provide a stimulating business environment and work on increasing the tax system’s competitiveness. In this context, AmCham is one of the important interlocutors”, said the Deputy Prime Minister and Minister of Finance, Marko Primorac.

After the Deputy Prime Minister’s speech, Petra Megla, Associate Partner at KPMG Croatia, held a presentation, “Income Tax – an Opportunity for Croatia to Attract Quality Human Resources.”

The panel discussion “The Role of Tax Policy in Stimulating Economic Growth” was attended by Božidar Kutleša, Director of the Tax Administration; Josip Funda, Senior Economist at the World Bank; Ivan Bumber, Policy and Public Affairs Lead at Pfizer, and Zoran Stanković, Vice President for Finance, Procurement and Investments at Atlantic Group.

The participants agreed that the general direction of Croatian tax policy is good, but considering that the main challenge faced by businesses is the lack of workforce, future tax changes should focus on facilitating finding and retaining a quality workforce, especially a highly qualified one. The panel discussion participants believe that this would undoubtedly contribute to increasing the competitiveness of the Croatian economy.

“Taking into account macroeconomic, political, and financial stability and access to European funds, Croatia is in a good position to make significant progress in raising the living standard of its citizens in the next few years. Changes to the tax system are not crucial for that. The tax system is already efficient, and any additional changes, such as the introduction of a property tax, should be carefully prepared. Reform efforts should be focused on raising the quality of public administration and the judiciary, anti-corruption, digitization, and the continuous development of workforce competencies through lifelong learning,” concluded Josip Funda, Senior Economist at the World Bank.