Can the efficiency of the Croatian tax authorities be improved?
MIHAELA BRONIĆ, PhD* VJEKOSLAV BRATIĆ, PhD*
Article** JEL: H11, H83 doi: 10.3326/fi ntp.38.3.1
* The authors would like to thank two anonymous referees for their useful comments and suggestions. ** Received: May 26, 2014 Accepted: July 18, 2014 A previous version of this paper was presented at the conference Tax Reforms: Experiences and Perspectives organized by the Institute of Public Finance, Faculty of Economics and Business, Zagreb and Faculty of Economics, Rijeka in Zagreb on June 20, 2014. Mihaela BRONIĆ Institute of Public Finance, Smičiklasova 21, 10000 Zagreb, Croatia e-mail: [email protected] Vjekoslav BRATIĆ Institute of Public Finance, Smičiklasova 21, 10000 Zagreb, Croatia e-mail: [email protected] - nition of Based on an anal- 1 ack of relevant and relia- ack of relevant of tax authorities ciency rst by identifying and abolishing rst by identifying tian tax authorities should collect more data and re- should collect more tian tax authorities ve publications with internationally comparable data on the tax systems INTRODUCTION AND LITERATURE INTRODUCTION AND REVIEW LITERATURE For example, see Sandford, Godwin and Hardwick (1989); Sandford et al. (1995); Evans, Pope and Hassel- dine (2001); Lignier and Evans (2012); and OECD (2004, 2006, 2009, 2011, 2013). dine (2001); Lignier and Evans (2012); and OECD (2004, 2006, 2009, 2011, 1 ACs is also provided in Allers (1994:33), who describes ACs as public-sector Allers (1994:33), who describes ACs is also provided in absence of a tax or would disappear if a costs that either would not exist in the particular tax were abolished. this topic worldwide. There has been widespread research into The process of collecting taxes is far from cost-free. Indeed, the process involves The process of collecting taxes is far from divides into administrative costs (ACs) certain costs that the literature typically Sandford, Godwin and Hardwick, and compliance costs (CCs) (see, for example, public-sector costs related to the ACs, which include This paper focuses on 1989). tax legislation, including proposals for enforcement (administration) of existing by the relevant public revenue collec- changes to that legislation that are proposed see Sandford, 1995; Sandford et al., tion authorities (for additional information, practical defi A 1989:3). 1995; and Sandford, Godwin and Hardwick, Abstract the effi whether to determine article were of this The goals their effi and to identify how period 1997-2012 over the improved in Croatia the administrative to our research According in the future. be improved ciency can the slightly over decreased of GDP, as a percentage in Croatia, costs of taxation is a need to Thus, there above the EU average. years but still remain fteen past fi fi costs of taxation, the administrative reduce costs. and have high administrative raise very little revenue nuisance taxes that service the reducing should be devoted to analysing and Second, special attention for telephone, expenses and expenses (especially IT expenses of tax authorities into ad- to research related services). The main problem mail and transportation period is the l over a longer Croatia ministrative costs in the Croable data, and hence lease them to the public. taxation, Croatia administrative costs, Keywords: 1 ysis of 60 studies on ACs and CCs since 1980, Evans (2003) concludes that in ACs and CCs since 1980, Evans (2003) concludes ysis of 60 studies on the costs rarely exceed 1% of the tax ACs have been explored, countries where impose a smaller ACs further, revenues that are collected by the administration; than do CCs (for additional details, burden (in both absolute and relative terms) ACs is the that explores The most prominent organisation see Evans, 2003:72). for Economic Co-operation and Development (OECD), which has Organisation released fi and tax administrations of 52 countries (i.e., all of the OECD, EU and G20 coun- to the most recent According and 2013). tries) (OECD, 2004; 2006; 2009; 2011 ratios among AC-to-GDP in OECD publication (2013), there are stark differences in one-third of however, the observed countries during the period 2004-2011;
FINANCIAL THEORY AND MIHAELA BRONIĆ, VJEKOSLAV BRATIĆ: PRACTICE CAN THE EFFICIENCY OF THE CROATIAN TAX AUTHORITIES BE IMPROVED? 38 (3) 253-275 (2014) 254 FINANCIAL THEORY AND MIHAELA BRONIĆ, VJEKOSLAV BRATIĆ: PRACTICE CAN THE EFFICIENCY OF THE CROATIAN TAX AUTHORITIES BE IMPROVED?
255 38 (3) 253-275 (2014) - ciency/ef- cult to access) ciency improve- ciency ciency/effective- ciency. ciency of tax authorities inciency of tax authorities Blažić (2004) demonstrated that the total 2 fteen years but remain above the average for fteen years but rst explored by Ott and Bajo (2000), who found rst explored by Ott ve-year period between 1995 and 1999, ACs accounted for approxi- and 1999, ve-year period between 1995 quality whenResearchers in other transitional countries have also faced both data unavailability and poor data conducting their analyses. For example, in exploring ACs in the Czech Republic, Vitek and Pubal (2002) argue that and Pubal (2002) argue Vitek ACs in the Czech Republic, conducting their analyses. For example, in exploring CCs for particularACs and data are only available at the aggregate level, which is often inadequate for calculating types of taxes. 2 pose a serious challenge for research. mately 0.55% of GDP; given their size, these costs left substantial room for savings. given their size, these costs left substantial mately 0.55% of GDP; for each type of tax;ACs the importance of determining the The authors emphasised there was no determination was impossible because that this they argued however, of overhead (general costs) to indi- ACs by type of tax, and the allocation record of (2004) found that a particular problem. Bratić and Pitarević vidual tax types posed the period 1997- during for an average of 0.55% of GDP ACs continued to account diffi and relevance of the data (which were 2001, but the accuracy In Croatia, the issue of ACs was fi ACs was of In Croatia, the issue that in the fi those countries, the ratio ranged between 0.15% and 0.25%. A relatively low share low relatively A and 0.25%. 0.15% ranged between the ratio countries, those low tax with in countries observed is primarily 0.12%) (below in GDP ACs of the national administered by taxes are not always those where major burdens and downward continuous A USA). Mexico and the (e.g., Chile, Estonia, government Australia, countries, including in a small number of ratio is observed trend in this Russia the Netherlands, Norway, Malaysia, Mexico, France, Lithuania, Denmark, phenomenon. to the cause of this as is offered but no explanation and the UK, taxation costs in Croatia accounted for 3.13% of GDP from June 2001 to June 2002, of GDP taxation costs in Croatia accounted for 3.13% More respectively. accounted for 0.47% and 2.66% of GDP, ACs and CCs of which Bratić and Šimović (2010) analysed the cost effi recently, Croatia during the period 2000-2007 in comparison with OECD member countries.Croatia during the period 2000-2007 in Administra- Customs Administration (TA), Tax They concluded that the Croatian the worst cost effi tion (CA) and Financial Police (FP) have The goals of this article were to determine whether the effi The goals of this article were to determine in Croatia improved over the period 1997-2012 and to identify how their effi in Croatia improved over the period 1997-2012 ciency can be improved in the future. We argue, however, that a primary problem however, argue, We ciency can be improved in the future. ACs in Croatia over a examination of is a lack of information relevant to the ACs of taxation in Croatia the total As a percentage of GDP, longer period of time. have fallen slightly over the past fi indicates that the effi The OECD (2013:178) EU member states. as the “cost-to-collection” ratio (calcu- ness of tax authorities is typically assessed by a coun- ACs in the revenues that are collected lated as the percentage share of variables remain constant, a decline in Assuming other tax administration). try’s relative costs (i.e., an effi this indicator over time suggests a fall in improvement). ment) and/or a rise in collected revenues (i.e., an effectiveness to the OECD (2013), this indicator should be interpreted with according However, effi caution, as several factors that are unconnected with tax authorities’ it. Other authors also emphasise the need for caution in fectiveness can affect ACs using the “cost-to-collection” ratio (see Sand- cross-country comparisons of u- ciency, ciency, ciency of the and in the ned ciency can infl ation); and ation); uence the ratio, such as the introduction uence the ratio, such as the introduction of the “cost-to-collection” ratio because uence on reasons: for the following cult ciencies, ACs are calculated and compared to establish dif- ACs are calculated and ciencies, ciency of tax administrations, are then analysed and explored for differences in the tax structure (e.g., the value added tax (VAT) registration the value added tax (VAT) in the tax structure (e.g., differences collecting taxes countries but high in others, and threshold is low in some ACs); of small taxpayers results in high number from a large the number of self-em- (e.g., the larger in the taxpayer structure differences ACs); higher the ployed taxpayers, the tax revenues as a total with large in tax rates (e.g., countries differences have heavy tax burdens and are associated with lower percentage of GDP with similar taxes but lower tax “cost-to-collection” ratios than countries burdens); with changes in tax rates (e.g., changes in revenues that are not associated unusual economic growth rates or infl several other factors that can infl of new taxes. types of revenues that are collected by tax authorities; for example, certain for example, by tax authorities; that are collected types of revenues oth- duties, whereas and customs collect social contributions tax authorities ers do not. social, economic and legal circumsta- demographic, political, country’s A infl nces can have a strong the following: Data collection does not typically employ a standardised methodology in the methodology employ a standardised does not typically Data collection defi ACs are in how are differences countries, as there different – – – – – – – ence the ratio between costs and GDP (e.g., large investments in new technologies, investments in new technologies, (e.g., large ence the ratio between costs and GDP revisions). costs arising from a new tax or frequent GDP Despite all these defi to the extent that they can be associ- These differences, ferences among countries. ated with the effi Therefore, we explain the research each individual country (Sandford, 2000:137). ACs between Croatia and we compare ACs in Croatia, and then methodology for we present conclusions on how to improve the effi the EU. Finally, Croatian tax authorities. ford, 1995:405; Sandford, 2000 and Evans, 2006). For example, Sandford Sandford For example, 2006). and Evans, 2000 Sandford, 1995:405; ford, “cost-to-col- on the based comparisons that cross-country notes (2000:119-123) are diffi lection” ratio (2013) point out that the potential maxi- Both Sandford (2000:123) and the OECD by tax authorities are an extremely impor- mum tax revenues that can be collected Thus, countries with similar especially in international comparisons. tant factor, with respect to effi different “cost-to-collection” ratios can be completely collected and potential maximum tax rev- which is measured as the ratio between enues. (calcu- the ratio between costs and GDP The OECD (2013:179-182) notes that for inter- ACs in GDP) might be more appropriate lated as the percentage share of indicator should also be employed with cau- this national comparisons. However, effi to tax authorities’ tion, as several factors that are unrelated
FINANCIAL THEORY AND MIHAELA BRONIĆ, VJEKOSLAV BRATIĆ: PRACTICE CAN THE EFFICIENCY OF THE CROATIAN TAX AUTHORITIES BE IMPROVED? 38 (3) 253-275 (2014) 256 FINANCIAL THEORY AND MIHAELA BRONIĆ, VJEKOSLAV BRATIĆ: PRACTICE CAN THE EFFICIENCY OF THE CROATIAN TAX AUTHORITIES BE IMPROVED?
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, ACs are pri- led with the 3 for those serv- 4 Opći porezni zakon Opći porezni 5 , until 2001 NN 53/91 and 106/93, Zakon o carinskoj službi ). According to that Law (NN 177/04, 55/11 and 25/12), the FP performed finan- and 25/12), the FP 177/04, 55/11 According to that Law (NN ). three institu- extent, from these and, to a lesser from the state budget nanced METHODOLOGY AND METHODOLOGY DATA The costs of courts imply the costs of administrative courts that are the first to adjudicate individual tax The costs of courts imply the costs of administrative courts that are the first to adjudicate individual tax FINA performs the following revenue-related activities, the analytical records of which are maintained by the performs FINA The FP existed from 28 December 1992 to 31 December 2001 before being abolished. The FP did not operate The FP existed from 28 December 1992 to 31 December 2001 before being abolished. FP The NN 147/08, 18/11, 78/12, 136/12 and 73/13). 78/12, NN 147/08, 18/11, in the period from 2001 to 2009 NN 67/01, in the period from 2009 to 2013 NN 83/09, 49/11 and 34/12, and from 2009 to 2013 NN 83/09, 49/11 in the period from 2001 to 2009 NN 67/01, in the period is that it is responsible for the assess- tasks of the CA from 2013 NN 68/13 and 30/14) the most important at the import and export of and other mandatory public charges VAT ment and collection of customs duties, cus- goods and implements customs control measures, including verifying the facts relevant to the taxation or toms clearance of goods. from 1 January 2002 to 31 December 2005, and the Agency was reinstituted from 1 January 2006 to 6 March from 1 January 2002 to 31 December 2005, and the (in Croatian was regulated by the Financial Police Law The work of the FP 2012 before being abolished again. Zakon o financijskoj policiji of budget regularity and timeliness of accounting, registration and payment cial monitoring of the legality, those regarding excise taxes, social security con- revenues and fees prescribed by particular laws (especially tributions, concession and lease agreements). Act (in Croatian According to the Customs Service and customs disputes (in Zagreb, Split, Rijeka and Osijek) and the costs of the High Administrative Court in and customs disputes (in Zagreb, Split, Rijeka and Osijek) and the costs of the High eral The Gen Zagreb, which is the second to adjudicate these disputes (on appeals of first-instance decisions). Act prescribes legal remedies in tax proceedings (Articles 159 through 171 of the Tax 5 4 3 Ministry of Justice and FINA was unsuccessful because (1) they responded that they was unsuccessful because FINA Ministry of Justice and to submit the data of the requested data; or (2) they promised were not in possession System Sup- Treasury reports, its to FINA According did). at a later date (but never a contract basis, but on TA certain activities on behalf of the port Centre performs TA (MF) instead of the the centre invoices the Ministry of Finance Regrettably, data on the costs of FINA and the courts could not be obtained, as they and the courts could not be obtained, of FINA data on the costs Regrettably, fi request for access to the information A are not publicly available. 2 re- that are institutions of three the costs include in Croatia ACs above, As noted and FP. CA TA, the and customs duties: for collecting taxes sponsible TA: (1) supporting the system of recording and assigning public revenues, and (2) conducting other activities (1) supporting TA: such as assessment activities, recording, supervision, collection and enforcement of cer- TA, on behalf of the tain local revenues on behalf of the local government units (for additional information, see FINA, 2012). Sandford (2000:117) and Evans (2006:2-3) detail additional costs that should be and Evans Sandford (2000:117) of tax ACs, such as parliamentary costs related to the enactment included in the the costs mentioned by Sandford and Evans are not ad- Although legislation. of these costs in the Croatian context dressed in this research, future explorations would be useful. ices. Therefore, the services that FINA provides on behalf of the TA and the costs of TA on behalf of the provides Therefore, the services that FINA ices. but TA as they are not produced by the these services should be further investigated, these costs are currently reported within ACs. However, should be included in the budget and are not clearly separated from other costs. the MF’s tions’ own revenues. Ott and Bajo (2000) note that for a more complete analysis ofa more complete analysis note that for Ott and Bajo (2000) own revenues. tions’ that actu- costs of the institution also include the ACs should ACs, the total Croatia’s 2001, this in- duties; before of tax and customs and maintains records ally collects the institution has Operations Institute, and since 2002, stitution was the Payment including the Ott and Bajo (2000) also suggest Agency (FINA). been the Financial decide tax and customs cases in the analysis. costs of the courts that marily fi even 8 , NN 67/01). Con- How- ce equipment). 7 According to the economic the economic to According 6 Thus, pre- ts and health protection). Zakon o Poreznoj upravi Zakon o Poreznoj , NN 71/99). costs of social on Croatia in which the collection rst study pensions, sickness benefi ts (e.g., Opći porezni zakon Opći porezni c amounts of tax revenues collected by the TA and the CA, but this was and the TA tax revenues collected by the c amounts of cation followed in Croatia’s state budget, ACs include operational costs/ operational include ACs budget, state in Croatia’s followed cation However, because of the inclusion of costs related to social contributions in our study, the total ACs during the total the inclusion of costs related to social contributions in our study, because of However, One example is the supervision of the correctness and timeliness of the calculation and payment of contri- This article considers Annual reports on the execution of the state budget of the Republic of Croatia for the Annual reports on the execution of the state budget of the Republic of Croatia This article considers the periods before and after 2001/2002 are not fully comparable. butions (see the period 2000-2012 (Ministry of Finance, 2000-2012); information on TA expenditures in relation to the finan- TA period 2000-2012 (Ministry of Finance, 2000-2012); information on Administration, 1995-2006); the Revenue and expenditure statements, cial plan for the period 1995-2006 (Tax Administration, 2002-2012); Reports on the for the period 2002-2012 (Tax TA receipts and outlays of the (Cus- for the period 1997-2012 number of employees, total annual revenues and total annual costs of the CA Administration, 1997-2012); and the Revenue and expenditure statements, receipts and outlays of the CA toms i.e., These sources are not always reliable, Administration, 2005-2012). for the period 2005-2012 (Customs reports, especially for the period across different the numbers for the same types of data occasionally differed before 2004, and hence the authors were forced to choose which numbers to include in the analysis. 7 8 6 Although the TA performed certain activities related to social contributions TA Although the This article uses reports from the MF, TA and CA. TA MF, from the reports article uses This before 2001, in July 2001, the TA became responsible for all of Croatia’s opera- became responsible for all of Croatia’s TA before 2001, in July 2001, the the assessment, record-keeping, tions related to social contributions, including of contributions, as well as the manage- collection, supervision and enforcement ment of misdemeanour proceedings ( ACs) has included costs related to pension- budget (and thus the TA the sequently, and unemployment and health insurance insurance contributions since 1 July 2001 at the same time, revenues from contributions since 1 January 2002. Moreover, total revenues that are collected by tax social contributions are included in the authorities. classifi services) and costs/expenses IT spent materials and for employees, expenses (e.g., and offi assets (e.g., buildings of capital for the procurement Thus, analyses. the necessary inadequate to perform these reports are often ever, not moni- the costs are is impossible because ACs for each tax the determining interesting to determine it would be tax. Moreover, to the type of tored according the specifi on VAT of the because we lacked data on the amount impossible in this study by the CA. imports that is collected the fi Nonetheless, this is Until 2001, social contri- ACs for 2001 and 2002. in the contributions are included Pension Insurance by separate institutions (i.e., the Croatian butions were collected Croatian Employment Health Insurance Institute and the Institute, the Croatian these institu- The costs of the status of extra-budgetary funds. Service), which had in the state budget. from social contributions) were not reported tions (and revenues the costs that are generated by these insti- Researchers have been unable to include what share of these ACs, as the available data did not clearly indicate tutions in the contributions versus the payment of costs are related to the collection of social various benefi ACs, and for these institutions in the total vious studies did not include the costs of contributions collected were not includ- the same reason, the revenues from social by tax authorities. ed in the total revenues that are collected
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259 38 (3) 253-275 (2014) ciency com- ciency in the period 2005- 9 gure 1, the total ACs in Croatia declined by approximately 10% by approximately in Croatia declined ACs total gure 1, the in methodology). ciencies (i.e., differences gure 2, Croatia’s ACs exceeded the EU average gure 2, Croatia’s 1 ANALYSIS OF ADMINISTRATIVE COSTS IN CROATIA IN CROATIA COSTS ADMINISTRATIVE OF ANALYSIS IN THE PERIOD 1997-2012 IGURE Note that the number of EU member states changed during that period, as Bulgaria and Romania joined the Note that the number of EU member states changed during that period, as Bulgaria and Romania joined ACs in Croatia, as a percentage of GDP, 1997-2012 of GDP, as a percentage ACs in Croatia, 9 EU in 2007. The sharpest declines in ACs were observed in 2000 and 2001, when a rise in GDP were observed in 2000 and 2001, when a rise in GDP ACs The sharpest declines in AC-to- ACs in absolute terms. From 2005 to 2010, the coincided with a decline in increased but fell slightly after 2010 as the economic situation in ratio again GDP on ad- GDP As a result, in 2012, Croatia spent 0.44% of its Croatia deteriorated. ACs in whether the total establish To ministering tax and customs legislation. the EU average, despite all of the con- Croatia are high, we compare them with straints and defi TACs: Tax Administration costs; CACs: Customs Administration costs; FPACs: Financial Police Administration costs; FPACs: costs; CACs: Customs Administration Tax TACs: Administration costs. CustomsAdministration (1995-2006; 2002-2012); Ministry of Finance (2000-2012); Tax Source: Administration (1997-2012; 2005-2012). As plotted in fi F As depicted in fi As depicted in 2012 from 1997 (from 0.48% to 0.44% of GDP). The largest AC-to-GDP ratio ratio AC-to-GDP The largest (from 0.48% to 0.44% of GDP). in 2012 from 1997 (0.58%). was recorded in 1999 The analysis of key indicators of the Croatian tax authorities’ (in)effi tax authorities’ Croatian of the key indicators of The analysis 3 pared to the average indicators for EU member states is presented below. Then, we Then, below. presented states is EU member for indicators to the average pared reduce. tax authorities could that the Croatian suggest costs 2011. Annex 1 features ACs as percentages of GDP for individual EU member ACs as percentages of GDP Annex 1 features 2011. AC data for the period before 2005 were not The states in the period 2005-2012. available for all EU member states, and the available data for the period after 2005 Interestingly, ACs for each country. do not clearly detail the actual composition of 2007 ACs were near the EU average, but they increased after in 2007, Croatia’s
10 gure 3). gure 3 2 IGURE IGURE State budget non-tax revenues (such as property income, various administrative fees, and penalties) are not State budget non-tax revenues (such as property income, various administrative fees, and penalties) are taxes in order to find out how much of these taxes should be included into revenues collected by TA. However, However, TA. taxes in order to find out how much of these taxes should be included into revenues collected by and this also remains to be investigated in future. has not responded to this inquiry, TA the included into revenues collected by TA, CA and FP because we did not have information how much TA, CA TA, because we did not have information how much and FP CA TA, included into revenues collected by Addition- in future studies. This should be investigated participate in administration of these revenues. and FP a fee in the amount of collects taxes on behalf of some local government units, charging TA because the ally, collects TA 5% of collected tax revenues, we wish to know the number of local government units for which the Sources: Ministry of Finance (2000-2012); Tax Administration (1995-2006; 2002-2012); Customs Ministry of Finance (2000-2012); Tax Sources: Administration (1997-2012; 2005-2012). total tax and customs revenues declined ACs in Croatia’s The percentage share of sharply in 2001 and 2002 (from 2.16% in 2000 to 1.14% in 2002, see fi 10 * For the purposes of this analysis, “collected tax revenues” are the tax revenues of the state budget. revenues the tax are revenues” * For the purposes of this analysis, “collected tax Sources: OECD (2013); Ministry of Finance (2000-2012); Tax Administration (1995-2006; 2002- OECD (2013); Ministry of Finance (2000-2012); Tax Sources: Administration (1997-2012; 2005-2012). 2012); Customs F (to 0.46% of GDP in 2011), while the EU’s average ACs fell markedly (to 0.23% (to 0.23% markedly ACs fell average the EU’s while 2011), in of GDP (to 0.46% in 2011). of GDP F ACs in Croatia as percentage of collected tax revenues, 1997-2012* of collected tax revenues, as percentage ACs in Croatia A comparison of ACs between Croatia and the EU, as a percentage of GDP, of GDP, as a percentage and the EU, Croatia ACs between of comparison A 2005-2011
FINANCIAL THEORY AND MIHAELA BRONIĆ, VJEKOSLAV BRATIĆ: PRACTICE CAN THE EFFICIENCY OF THE CROATIAN TAX AUTHORITIES BE IMPROVED? 38 (3) 253-275 (2014) 260 FINANCIAL THEORY AND MIHAELA BRONIĆ, VJEKOSLAV BRATIĆ: PRACTICE CAN THE EFFICIENCY OF THE CROATIAN TAX AUTHORITIES BE IMPROVED?
261 38 (3) 253-275 (2014) rst glance it is a need to identify and review rst, there rst step of an investigation of ACs. Figure 4 compares of rst step of an investigation gures, it is possible to conclude that ACs in Croatia should be conclude that gures, it is possible to 4 cally, the cost of collecting 100 kuna in tax and customs revenues in 2002 in 2002 revenues and customs kuna in tax 100 of collecting the cost cally, IGURE ACs in Croatia and the EU, as a percentage of collected revenues, 2005-2011 of collected revenues, and the EU, as a percentage ACs in Croatia Sources: OECD (2013); Ministry of Finance (2000-2012); Tax Administration (1995-2006; 2002- (2000-2012); Tax OECD (2013); Ministry of Finance Sources: 2005-2012). Administration (1997-2012; 2012); Customs F In 2005, ACs in Croatia accounted for approximately 1.2% of collected revenues, ACs in Croatia accounted for approximately In 2005, a reversal of this trend oc- which was nearly equal to the EU average. However, increased to approximately 1.5% ACs in Croatia steadily curred after 2005, when ACs decreased to 1.1% the average EU Moreover, of collected revenues in 2011. From the previous fi Specifi of as percentage ACs in the declines cause of important The most kuna. was 1.14 inclusion of explained 2002 was the previously revenues in 2001 and collected constitute the contributions tax revenues. Social in collected social contributions 2000-2012, In the period VAT. of tax revenues after abundant source second most at the 34% of total tax revenues for approximately accounted social contributions increased during this GDP Additionally, annex 2). level (see general government After 2002, was abolished. and the FP ACs decreased in absolute terms period, 2012. 1.4% of collected tax revenues in reaching ACs increased slightly, reviewed and if possible reduced. Thus, fi reduced. reviewed and if possible “nuisance” taxes that raise very little revenue (and may have high administrative raise very little revenue (and may have “nuisance” taxes that and Sloan, Foster, as in other countries (see Chittenden, and compliance costs some of these “nuisance” taxes were if be more effective 2010:159)). It might is a need for detailed analysis, at fi Although there entirely eliminated. taxes might be strong candidates for appears that in Croatia some of following (e.g., the public land use tax or second “nuisance” taxes: certain property taxes taxes (e.g., trading and excise VAT the home tax), consumption taxes, excluding (see annex 2). In other words, the “nui- name tax), and/or certain other small taxes sance” taxes should be fi ACs as percentage of collected revenues with the EU average. Croatian nancial statements for the period 2004-2012 reveals that the larg- gure 5). In the period 2004-2012, total ACs rose by approximately 60% gure 5). In the period 2004-2012, total 5 cient relative to the EU average remains an open question, and hence we and hence question, an open remains average to the EU relative cient IGURE (from 886 million kuna to approximately 1.4 billion kuna). For the entire period (from 886 million kuna to approximately ACs, while the remaining 50-60% of the total accounted for TACs 1997-2012, costs Administration’s Financial Police ACs were primarily CACs (while the were almost negligible). (FPACs) An analysis of fi and service expenses and accounted for the est expenses were recorded for staff ACs (approximately 90% – table 1). bulk of the total over the ob- and service expenses increased steadily As table 2 indicates, staff expenses increased by 46%, from 631 million kuna to 921 served period (staff million kuna, and service expenses increased by more than 330%, from 96 million ex- and service Therefore, a detailed analysis of staff kuna to 420 million kuna). penses is presented below. According to the For the EU countries, only data on salary expenses were available. ACs in the share of salary expenses in available data, in the period 2005-2011, TACs: Tax Administration costs; CACs: Customs Administration costs; FPACs: Financial Police Administration costs; FPACs: Administration costs; CACs: Customs Tax TACs: Administration costs. Administration (1995-2006; 2002-2012); Customs Ministry of Finance (2000-2012); Tax Sources: Administration (1997-2012; 2005-2012). ACs more than doubled in absolute terms (from ap- From 1997 to 2012, total more than 1.4 billion kuna). From 1997 proximately 700 million kuna to slightly increased in absolute terms, with the excep- and CACs generally TACs to 2009, and CACs declined slightly after TACs tion of the years 2000, 2001 and 2002. 2009 (fi of collected revenues in 2011. Thus why the Croatian tax authorities appear to be appear tax authorities Croatian why the Thus 2011. in revenues of collected ineffi in greater detail below. ACs in Croatia structure of examine the F ACs by institution, in million kuna, 1997-2012 in million ACs by institution,
FINANCIAL THEORY AND MIHAELA BRONIĆ, VJEKOSLAV BRATIĆ: PRACTICE CAN THE EFFICIENCY OF THE CROATIAN TAX AUTHORITIES BE IMPROVED? 38 (3) 253-275 (2014) 262 FINANCIAL THEORY AND MIHAELA BRONIĆ, VJEKOSLAV BRATIĆ: PRACTICE CAN THE EFFICIENCY OF THE CROATIAN TAX AUTHORITIES BE IMPROVED?
263 38 (3) 253-275 (2014) in %) (change 2004-12 Average Average 2012/2004 36 4348 51 55 56 3 57 54 557 47 6 4 5 4 4 60 14 4 5 5 4 0 4 1 4 0 4 1 4 0 4 0 0 4 0 0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2004 2005 2006 2007 2008 2009 2010 2011 2012 was below the average of the EU member states. In the period 2005-2011, period 2005-2011, In the states. the EU member average of below the was 11 2 1 ABLE ABLE Salary expenses in Croatia only include salaries and social security contributions. Other staff expenses are Salary expenses in Croatia only include salaries and social security contributions. Other staff Staff expenses Staff Material and 631 expenses energy expenses 668Service 775 898Other current 96 971 975expenses 971 165 966 167expenses921Capital 316 369AC 446 Total 26 410 46 409 420 43 55 78 70 336 78 73 793 75 38 924 1,049 42 1,351 1,472 1,560 1,516 1,508 1,439 – Staff expenses Staff Material and 80 expenses energy expenses 72Service Other current 12 74expenses 18 67expensesCapital 16 66 ACsTotal 3 23 63 5 25 64 5 29 64 100 6 27 64 100 5 27 100 5 68 29 100 5 100 5 23 100 3 100 100 5 100 – As shown in table 4, of service expenses, expenses for IT services grew the most services grew the As shown in table 4, of service expenses, expenses for IT rapidly (by more than 7,000%, from approximately 3 million kuna to 214 million From table 3, it is clear that particular attention should be devoted to analysing IT should be devoted to analysing IT From table 3, it is clear that particular attention approximately 3% to 51% of total serv- services expenses, as they increased from serv- ice expenses in the period from 2004 to 2012. It is interesting that these IT ices expenses are only related to maintenance and support for existing software and not to purchasing new software/hardware. the EU average was approximately 70% of the total ACs. In a review of previous In a review ACs. the total 70% of was approximately average the EU costs represent the largest expenses reports that staff (2000:118) studies, Sandford ACs. of the total three-quarters account for approximately and typically 11 * Only ACs financed from the state budget are analysed. Smaller amounts of ACs financed from ACs financed from analysed. Smaller amounts of the state budget are financed from ACs * Only not analysed due to a lack of detailed data. are own revenues and FP CA TA, Ministry of Finance (2000-2012). Source: T T Croatia not included (e.g., fieldwork and separation allowances). ACs, in million kuna, 2004-2012* ACs as a percentage of total administrative costs, 2004-2012.* total administrative of ACs as a percentage * Only ACs financed from the state budget are analysed. Smaller amounts of ACs financed from ACs financed from analysed. Smaller amounts of the state budget are ACs financed from * Only not analysed due to a lack of detailed data. are own revenues and FP CA TA, Ministry of Finance (2000-2012). Source: 2004-12 Average Average 11 8 13 9 8 7 11 3 7 9 50 61 46 27 25 8 4 5 27 6 2 2 3 4 7 17 24 21 18 33 6 3 ABLE IGURE Expenses 2004 2005 2006 2007 2008 2009 2010 2011 2012 Telephone, mail and Telephone, transportation services Current and investment maintenance services services IT servicesOther service expensesTotal 100 100 3 11 100 3 8 100 3 15 100 37 10 100 40 7 100 34 5 100 38 6 100 52 11 51 10 – 29 9 Utility servicesUtility rentalsand Leases Intellectual and 7 16personal services 6 13 8 12 6 7 5 7 4 6 6 7 7 2 7 2 6 8 * Only ACs financed from the state budget are analysed. Smaller amounts of ACs financed from ACs financed from amounts of analysed. Smaller the state budget are ACs financed from * Only not analysed due to a lack of detailed data. are own revenues and FP CA TA, Ministry of Finance (2000-2012). Source: T * For Croatia, only ACs financed from the state budget are analysed. Smaller amounts of ACs analysed. Smaller amounts of the state budget are ACs financed from only * For Croatia, not analysed due to a lack of detailed data. are own revenues and FP CA TA, financed from Administration (1995-2006; 2002- OECD (2013); Ministry of Finance (2000-2012); Tax Sources: Administration (1997-2012; 2005-2012). 2012); Customs F kuna). Leasing and rental expenses also increased sharply (by more than 300%, more than (by sharply also increased expenses and rental Leasing kuna). personal-service and did intellectual kuna), as million kuna to 30 7 million from kuna). kuna to 21 million 800%, from 2 million (by approximately expenses also high in abso- services were mail and transportation for telephone, Expenses of approxi- an average period, as they constituted during the observed lute terms ana- should and CA TA both the Consequently, million kuna annually. mately 90 what extent whether and to in detail and examine expenses lyse the mentioned be reduced. these expenses should Service expenses, 2004-2012, as a percentage of total service expenses* Service expenses, 2004-2012, as a percentage Salary expenses in Croatia and the EU, percentage of ACs, 1997-2011* of the EU, percentage and Salary expenses in Croatia
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12 cult 2012/2004 (change in %) 48 10110 77 85 13 93 21 119 28 100 31 2 84 31 3 76 45 5 13 1357 28 26 77166 34 17 21841 7 4 ABLE IGURE The year 1999 is perhaps an exception, as ACs rose markedly after one of the most radical tax changes ACs rose markedly after one of the most radical tax changes is perhaps an exception, as The year 1999 Telephone, mail and Telephone, services transportation Current and investmentCurrent and services maintenance servicesUtility rentalsand Leases Intellectual and 7personal services 15services IT 921 services 14Other 21 18 service expenses 23Total 19 26 96 19 28 165 10 3 24 28 167 13 5 29 9 316 25 5 29 9 369 33 116 446 26 149-44 323 410 22 149 409 24 156 420 43 214 43 214 – 326 7,455 Expenses 2004 2005 2006 2007 2008 2009 2010 2011 2012 ACs and GDP developments in Croatia, 1997-2012 in Croatia, developments ACs and GDP Source: Ministry of Finance (2000-2012). Source: 12 F Finally, it would be interesting to examine whether increases/decreases in ACs are it would be interesting to examine whether increases/decreases in Finally, one could determine whether the totalrelated to tax legislation changes in Croatia; most radical changes in the national taxACs rose during the years in which the ACs, change in tax law leads to a rise in system occurred. One can assume that every employees to manage a more complex sys- as there is, for example, a need for new major changes in the most important types of taxes (the per- Annex 3 reports tem. contributions) in Croatia in and social VAT sonal income tax, corporate income tax, in Croatia as changes in tax legislation are frequent the period 1997-2012. However, hly diffi annually), it would be hig (tax rates and/or tax bases are changed nearly ACs. changes and changes in total to establish any causality between tax legislation * Only ACs financed from the state budget are analysed. Smaller amounts of ACs financed from ACs financed from analysed. Smaller amounts of the state budget are ACs financed from * Only not analysed due to a lack of detailed data. are own revenues and FP CA TA, of Finance (2000-2012). Ministry Source: T (which occurred in 1998) – the introduction of the VAT. (which occurred in 1998) – the introduction of the Service expenses, in million kuna, 2004-2012* kuna, in million expenses, Service Thus, the need to collect cost data by type of tax should be strongly emphasised. Thus, the need to collect cost data by type ciency of the Croatian a thorough analysis of ACs a thorough analysis of
of the reasons is suggest that one gures rst action that the tax authorities could take is to iden- Second, there is a need for
nd appropriate measures, if necessary and/or possible, to reduce the underly- CONCLUSIONS ciency can be improved in the future. The key indicator of the analysis (ACs as The key in the future. ciency can be improved The goals of this article were to determine whether the effi The goals of this article Figure 7 suggests that the increase in ACs in Croatia during the period 2002-2012 2002-2012 the period during in Croatia ACs in increase that the 7 suggests Figure sim- FP and CA TA, the movements); (GDP growth to economic be related could whereas they economic growth, during periods of expenditures ply have higher explain this is needed to downturns. More analysis during economic spend less tables and fi but the previous relationship, the costs expenses, to staff growth, in addition the periods of economic that during and support related to maintenance dramatically (costs services increased for IT for existing software). 4 identify how their ef- over the period 1997-2012 and to tax authorities improved fi but remained above the declined during the observed period a percentage of GDP) their efforts should intensify and CA TA Therefore, the EU member state average. revenue at should seek to collect the maximum The tax authorities ACs. to reduce framework (Sandford, Godwin and the minimum cost within the existing taxation The fi Hardwick, 1989:203). According to the present analysis, staff to establish whether they can be reduced. and expenses for telephone, mail and transportation serv- expenses expenses, IT and TA both the categories. Consequently, expenditure ices represent the largest to determine should devote particular attention to analysing these expenses CA reduced. whether and to what extent they can be ACs in Croatia were primarily related to economic In the period 2002-2012, are higher and FP CA TA, of the movements), as the expenditures growth (GDP during economic downturns. During pe- when the economy is strong and lower services IT expenses, the costs for to staff riods of economic growth, in addition maintenance and support for existing soft- increased dramatically (costs related to ware). Vitek 2000; Bratić and Pitarević, 2004; As in previous studies (e.g., Ott and Bajo, by the unavailability of public and Pubal, 2002), this research was constrained ACs cannot be attributed to individual types of taxes, data. Due to inadequate data, which is a situation that should be improved in the future. Such information would to administer to establish which taxes are the most expensive and CA TA help the and fi obtain a better picture of the total cost of collecting taxes and to be To ing costs. able to minimise them, in addition to researching administrative costs, it is also necessary to research the compliance costs of each tax because there is an element of transferability between administrative costs and compliance costs (as the gov- ernment may assign the responsibilities for and costs of collecting taxes to tax- tify and, if possible, abolish nuisance taxes that raise very little revenue and have tify and, if possible, abolish nuisance taxes high administrative costs.
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267 38 (3) 253-275 (2014) payers instead on its own administration). Efforts should also be made to establish made to establish also be should Efforts administration). on its own instead payers tax and maintains collects that the institution by FINA, generated that are the costs tax and courts that adjudicate CA, the costs of and TA behalf of the records on enacting tax legislation. costs related to and parliamentary customs cases, cant factors factors cant Signifi comparisons of ratios comparisons affecting cross-country affecting cross-country Tax Administration, Tax Customs Administration, Financial Police Costs include customs duties Some major costs not included Costs exclude debt collection Costs include customs duties * Administrative costs of tax administration/ Administrative n.a. n.a. n.a 0.18 0.19 0.25 0.25 0.27 0.26 0.29 0.19 0.21 0.19 0.17 2005 2006 2007 2008 2009 2010 2011 gross domestic product, measured as a percentage measured domestic product, gross ** ** HungaryMaltaBelgium 0.30Netherlands 0.33Slovenia 0.40 n.a. 0.38 0.39 0.42Germany n.a. 0.36 0.40 0.41Portugal n.a. 0.34 0.42 0.39 n.a. 0.34Poland n.a. 0.38 0.35 0.30 n.a. 0.35 0.37 n.a.Cyprus 0.29 0.26 0.26 0.33 0.35 0.28 0.41 0.27 0.25 0.35 0.33 0.28 0.36 0.31 0.28 0.25 0.29 0.29 0.29 0.25 0.29 0.28 0.29 0.27 0.28 0.24 0.27 0.23 0.26 0.27 0.25 GreeceCroatia n.a. n.a. 0.36 n.a. 0.38 0.43 n.a. 0.43 n.a. 0.48 n.a. 0.47 n.a. 0.45 IrelandUnited Kingdom n.a.EU averageRomania n.a. 0.24 0.28 0.24 0.34France 0.27 0.24 0.28Bulgaria 0.40 0.27 0.29 n.a.Latvia 0.32 0.29 0.27 n.a.Luxembourg 0.26 0.32 0.26 0.24 0.25 0.33Finland 0.25 0.31 0.25 0.23 0.25 0.25 0.24 0.23 Denmark n.a. 0.20 0.21 0.22 0.23Czech Republic 0.13 0.22 0.22 n.a. 0.24 0.21 0.22 0.23Slovakia 0.24 0.23 0.35 0.23 0.37 0.21 0.22 0.24 0.25 0.36 0.23Italy 0.30 0.20 0.20 0.23 0.23 0.34 0.29 0.21 0.19 0.22 0.22 0.29 0.30 0.23 0.20 0.20 0.23 0.31 0.21 0.19 0.17 0.21 0.21 0.20 n.a. 0.20 n.a. 0.18 0.18 SwedenLithuaniaAustria 0.19Spain 0.19 n.a. 0.19 n.a.Estonia 0.18 n.a. 0.23 0.18 n.a. 0.22 0.18 n.a. 0.15 0.21 0.17 n.a. n.a. 0.19 0.17 n.a. 0.20 0.16 0.13 3.69 0.16 0.13 1.91 0.15 0.13 1.86 0.13 1.82 0.13 0.11 * GDP at market prices in millions of national currency units. at market prices in millions of national currency * GDP detected in the original data. that were errors to correct revised ** Cyprus: The data were by other government Payments made on behalf of the Inland Revenue Department and VAT in these specific years. not reflected departments are func- for tax-related provided based on cost data that were Italy: Calculations prior to 2009 are work of the separate tax police body body (Agenzia Entrate), tax-related tions of the revenue not pro- debt collection functions (Equitalia); data are di Financia), and separate tax (Guardia vided for subsequent years. OECD (2013). Source: ANNEX 1 ANNEX 2005-2012 of GDP, as a percentage states, EU member ACs in
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269 38 (3) 253-275 (2014)
Source: Ministry of Finance (2012); IMF (2014). IMF (2012); Finance of Ministry Source:
** Other consumption taxes excluding VAT and excise taxes (e.g., motor vehicle tax, boat tax, slot machine tax; trading name ta name trading tax; machine slot tax, boat tax, vehicle motor (e.g., taxes excise and VAT excluding taxes consumption Other ** x, tax on gains from games of chance). of games from gains on tax x,
* Property taxes are: the real property transaction tax, inheritance and gift tax, public land use tax and second home tax. home second and tax use land public tax, gift and inheritance tax, transaction property real the are: taxes Property *
Abbreviations: CIT – corporate income tax; SOC.C – social contributions; PIT – personal income tax; VAT – value added tax. added value – VAT tax; income personal – PIT contributions; social – SOC.C tax; income corporate – CIT Abbreviations:
oa 0. 0. 0. 0. 0. 0. 0. 0. 0. 0. 0. 0. 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Total
Other taxes 0.7 0.7 0.6 0.4 0.4 0.4 0.3 0.3 0.3 1.2 2.0 0.3 0.3 0.6 0.3 0.3 2.0 1.2 0.3 0.3 0.3 0.4 0.4 0.4 0.6 0.7 0.7 taxes Other
trade and transactions and trade
5.8 4.8 2.7 2.2 1.9 1.7 1.6 1.5 1.6 1.5 1.5 1.6 1.6 2.3 1.6 1.6 1.5 1.5 1.6 1.5 1.6 1.7 1.9 2.2 2.7 4.8 5.8
Taxes on international international on Taxes
taxes**
0.5 0.4 1.0 0.9 1.1 1.1 1.4 1.4 1.2 1.2 1.4 1.6 1.6 1.1 1.6 1.6 1.4 1.2 1.2 1.4 1.4 1.1 1.1 0.9 1.0 0.4 0.5
Other consumption consumption Other
xietxs 1. 1. 1. 1. 1. 1. 1. 1. . . 1. 1. 1. 11.4 10.0 10.3 10.8 9.7 9.9 11.0 11.5 11.9 12.4 12.9 13.0 12.4 11.8 taxes Excise
A 3. 3. 3. 3. 3. 3. 3. 3. 3. 3. 3. 3. 3. 34.5 36.3 34.7 34.3 32.8 34.5 34.1 34.7 35.3 35.0 34.8 34.2 34.7 33.6 VAT
Property taxes* 1.2 1.0 0.8 0.7 0.9 0.8 1.0 1.0 1.0 0.9 0.8 0.8 0.7 0.9 0.7 0.8 0.8 0.9 1.0 1.0 1.0 0.8 0.9 0.7 0.8 1.0 1.2 taxes* Property
Payroll tax 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 tax Payroll
O.C 12 21 32 37 43 41 37 36 38 52 51 55 3833.8 33.8 35.5 35.1 35.2 33.8 33.6 33.7 34.1 34.3 33.7 33.2 32.1 31.2 C SOC.
CIT 3.7 4.2 4.9 5.3 5.1 6.1 7.1 8.0 8.8 8.3 5.8 6.7 6.9 6.2 6.9 6.7 5.8 8.3 8.8 8.0 7.1 6.1 5.1 5.3 4.9 4.2 3.7 CIT
PIT 11.5 9.6 9.5 8.9 9.0 8.5 8.8 9.0 8.9 9.1 8.4 8.5 8.8 9.1 8.8 8.5 8.4 9.1 8.9 9.0 8.8 8.5 9.0 8.9 9.5 9.6 11.5 PIT
2000-2012
20 0120 0320 0520 0720 0921 012012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000
Average Average
Total tax revenues of the consolidated general government, in percentages, Croatia, 2000-2012 Croatia, percentages, in government, general consolidated the of revenues tax Total ANNEX 2 ANNEX t and water – the total rate of the pension – the total rate of the pension – the total pension insurance – a special contribution for – a reduced (zero) rate is introduced – a reduced (zero) rate is – the general rate is increased from – the general rate is increased – the general rate is reduced to 20% – rates of 25% and 35% are replaced and 35% are replaced – rates of 25% – rates of 20% and 35% are replaced PIT and 35% by rates of 20% CIT 25% to 35% SOC.C reduced from insurance contribution is 25.5% to 21.5%; insurance – the total rate of the health from 14% to contribution is increased 18%; – the child benefi contributions are abolished VAT for certain products SOC.C contribution rate is reduced from 21.5% to 19.5%; – the total health insurance contribution rate is reduced from 18% to 16% PIT by rates of 15%, 25% and 35% CIT SOC.C insurance against accidents at work and occupational diseases is introduced (0.47%) Change Tax basesTax rates Tax – a tax on dividends for non-resident legal – four new types of tax relief are introduced is introduced (at the standard rate of 22%) is introduced (at the standard – the list of products that are taxed at – the list of products that are taxed – investment incentives are introduced – incentives for HMAs are introduced – the PA increases from 700 to 800 kuna; from 700 to 800 kuna; increases – the PA – PA increases to 1,000 kuna – PA – the PA increases to 1,250 kuna increases to 1,250 – the PA – an incentive for HMAs is introduced PIT – tax relief for CDWV is introduced – tax relief for CDWV VAT PIT VAT the reduced (zero) rate is expanded PIT CIT VAT at the reduced (zero) rate is expanded PIT (the employment incentive, education and training incentive, deduction of insurance premiums paid by taxpayers to domestic insurance companies and incentive for self- ASSCs and in the City employed individuals in who determine their income as the Vukovar of between receipts and outlays on the difference basis of business books) CIT CIT entities is introduced; ASSCs and investment incentives – tax relief for is changed; Vukovar, – incentives for the City of employment incentives and disabled persons’ incentives are introduced PIT CIT
1997 1998 1999 2000 2001 2002 ANNEX 3 ANNEX social and VAT tax, the income tax, corporate income in personal changes Basic 1997-2012 contributions,
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271 38 (3) 253-275 (2014) – the total pension insurance – the total pension insurance – the standard rate is increased – the new reduced (10%) rate – rates of 15%, 25%, 35% – rates of 15%, 25% and 35% are – rates of 15%, PIT and 45% are replaced by rates of 12%, 25% and 40% VAT to 23% VAT is introduced PIT rates of 15%, 25%, 35% replaced by and 45% SOC.C contribution rate is increased from contribution rate is increased 19.5% to 20%; contribution – the total health insurance to 15.5% rate is reduced from 16.47% Change Tax basesTax rates Tax rst group) rst – a special contribution for the – pension insurance contributions on – pension insurance contributions – the list of products that are taxed at – the list of products that are taxed at – incentives for disabled persons – the tax on dividends for non-resident – an R&D incentive and education – an R&D incentive and – the tax brackets are changed; a new form – a new form of tax relief is introduced is increased to 1,800 kuna – the PA – the tax brackets are changed; – the tax brackets are changed; – the tax brackets are changed; – the tax brackets PIT of tax relief is introduced (a voluntary pension insurance premium paid by employers on behalf of their employees) the reduced (10%) rate is expanded PIT (a deduction from the lump-sum amount of tax on income from crafts and agriculture in and islands Vukovar ASSCs, HMAs, City of the of the fi CIT and employment incentives are abolished; – three forms of tax relief are changed (the investment incentive, R&D incentive and education and professional development incentive) PIT VAT – the PA is increased to 1,600 kuna – the PA CIT legal entities is lifted; – tax relief for companies that are engaged in shipping activities is introduced SOC.C employment of disabled persons is introduced VAT the reduced (zero) rate is reduced PIT PIT is increased to 1,500 kuna; – PA of tax relief are introduced – two new types and and development incentive (the research housing allowance) health care and CIT incentive and professional development are introduced SOC.C contributions from salaries and health insurance salaries are abolished
2009 2010 2008 2007 2006 2005 2003 – the health insurance – the standard rate is increased to – the standard rate is increased
VAT 25% SOC.C from 15% contribution rate is reduced to 13% Change t shares t Tax basesTax rates Tax – the list of products that are taxed at the products that are taxed at – the list of – a tax on dividends and profi – a tax on dividends and – two types of tax relief are abolished of tax relief are abolished – two types – the PA is increased to 2,200 kuna; the tax – the PA PIT to paid by taxpayers (insurance premiums health companies and the domestic insurance allowance) care and housing PIT brackets are changed CIT reduced (10%) rate is expanded VAT of non-resident legal entities is introduced; of non-resident legal entities are replaced by a similar – investment incentives incentive and type of relief (investment of investment incentive for the promotion environments)
2011 2012 Abbreviations: ASSC – areas of special state concern; CDWV – Croatian Disabled Homeland Disabled – Croatian of special state concern; CDWV ASSC – areas Abbreviations: – hill and moun- – social contributions; HMA – corporate income tax; SOC.C CIT Veterans; War – PIT – personal allowance (other than the personal allowance for pensioners); PA tain areas; – value added tax. personal income tax; VAT na na dobit, Zakon o porezu na dodanu vrijednost, Zakon o porezu o porezu Zakon Source: hodak, Zakon o doprinosima. do
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