Taxes in Croatia Characteristics of taxes A good

Taxes in Croatia

Characteristics of taxes �A good tax system is based on the following principles: � Efficiency � Equity � Effectiveness � Simplicity � Stability

� Efficiency – taxes must have as little as possible impact on relative prices � Equity – taxes must be justly distributed among the member of a community � Effectiveness – taxes must ensure a sufficient amount of public revenue to cover reasonable amounts of public expenditure � Simplicity – taxes must be simple and clear � Stability – the tax system must not change very often

Categories of taxes Taxes can be divided in several ways: � according to the tax base � according to the level of government to which the tax revenue belongs (state and local taxes) � according to which section of the population they hit most (progressive or regressive taxes)

Tax system � Current tax system includes the following taxes: � Corporate income tax � Personal income tax � Value-added tax � Special taxes (excise duties) on certain products � Real estate transfer tax � Levies on the organisation of games of chance � County, municipal and town taxes

� Corporate income tax – porez na dobit � Personal income tax – porez na dohodak � Value-added tax – porez na dodanu vrijednost � Special taxes (excise duties) on certain products – posebni porezi (trošarine) � Real estate transfer tax – porez na promet nekretnina � Levies on the organisation of games of chance – naknade za priređivanje igara na sreću � County, municipal and town taxes – županijski, općinski i gradski porezi

From the Constitution � Article 51 � Everyone shall participate in the defrayment of public expenses in accordance with their economic possibilities � The system of taxation shall be based on the principles of equality and equity

Croatian and EU tax system � The Croatian tax system is comparable to the tax systems of EU member states and is based on a number of direct and indirect taxes.

Direct tax �A tax that is finally borne by a person (legal or natural) and cannot be shifted to another person.

Basic direct taxes � Corporate income tax � Personal income tax � Surtax on personal income tax

Indirect tax �A tax that is not borne by the one who pays it, but is most often shifted to others. � Taxpayers of indirect taxes most commonly shift the burden of these taxes through the price of their goods and services, onto the final consumer – the population at large (e. g. VAT).

Basic indirect taxes � Value added tax � Excise taxes � Real property transfer tax

State taxes � Corporate � VAT � Excise � Taxes income taxes and social security contributions account for approximately 90% of overall budgetary resources

Equal legal position � The Republic of Croatia guarantees the same legal position on the market to all entrepreneurs (domestic and foreign)

Read the text taxes in Croatia (p. 8) and answer the following questions: � � � What are the foundations of the Croatian economic system? What does the Republic of Croatia guarantee to foreign investors? Is the Croatian tax system comparable to the tax systems of European Union member states? What is the Croatian tax system based on? How does Croatia deal with the problem of double taxation?

Read the information in the table (p. 9 -11) and complete the following statements: � � � The tax base for VAT is the sales price of all _______ delivered or _______ performed. Taxpayers of excise taxes on oil products are _____________ of oil products and government body for _____________. The excise tax rate on alcohol is __________ of absolute alcohol. Excise taxes on beer are regulated by ___________________. The excise tax rate on coffee is HRK 5 to 20 per kg, depending on _________________. Second-hand buyers of cars have to pay __________.

Complete the text: � assessed, � Croatia’s direct, indirect, estate, corporate tax year is, in most respects, the calendar year. The country’s tax structure includes both ________ taxation through income taxes and profit taxes, and ______ taxation through value added tax. In addition, there are excise taxes, real ______ tax and local taxes. Income taxes are ________ on individuals. The profit tax is essentially a ________ tax.

Answer key � Croatia’s tax year is, in most respects, the calendar year. The country’s tax structure includes both direct taxation through income taxes and profit taxes, and indirect taxation through value added tax. In addition, there are excise taxes, real estate tax and local taxes. Income taxes are assessed on individuals. The profit tax is essentially a corporate tax.

Vocabulary � Entrepreneurial freedom – poduzetnička sloboda � Free market – slobodno tržište, tržišna sloboda � Foreign investors – strani ulagači � Direct taxes – izravni porezi � Indirect taxes – neizravni porezi � Double taxation – dvostruko oporezivanje � Contributions - doprinosi � Real estate – nekretnina � Surtax - prirez

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