WARNING FROM CEA: THE LABOUR MARKET ALMOST INEXISTENT – WITHOUT SERIOUS TAX BREAKS THERE WILL BE NO MANUFACTURING COMPANIES!

Croatia is in a serious position due to the lack of workers on the labour market. Therefore, there is a need for tax changes in order to shift labour costs to promote further wage growth. The possibility for investing in salary growth exclusively from the profits of the company is completely exhausted, while without profit, companies are jeopardizing their investment and development potential, and thus the viability of the business.

In some regions the situation requires even the preparation of disastrous scenarios on the lack of labour force; employers from all regions of Croatia are reporting about lack of workforce and warn that they are forced to cancel already contracted jobs and orders as well as pay penalties because they do not have enough workers to do business.

Gordana Deranja, President of the CEA: "The proposed changes to the tax laws will not change anything. We are at the rock bottom, we suffer from a chronic lack of workforce. Perhaps there is not such a shortage in Zagreb, but our members from other parts of Croatia are constantly warning us: there is more work  than ever, but there is no one to do it. The pool is empty. When we appealed earlier to the Government, they did not raise quotas for foreign workers, and now that the quotas have been raised, no one is coming to work here. 

Everywhere in our vicinity wages are higher and there is no need to explain specifically what will happen with the opening of Austrian and Slovenian labour markets. We are not the only country with the problem of labour shortage and we need to be aware that our “problem” is not only Germany or Ireland – even the countries in our immediate environment have thousands of new vacancies – and they are counting on our workers as well. "

Davor Majetić, CEA’s Director General commented: "The new wave of tax changes must primarily serve the further ease of doing business for the entrepreneurs in the Republic of Croatia in order to strengthen the competitiveness of companies, enable a stronger growth, and then create the prerequisites for further salary growth and retention of work force. Ultimately, we believe that both, CEA and the Government have the same goals - demographic stability and economic growth of the Republic of Croatia. "

CEA calls for urgent agreement between different branches of the Government to significantly lower labor costs and other operating costs - it is clear that changes in the tax system or lowering the tax burden cannot be significant without reform and reduction or rationalization of costs and spending of the State. 

In this regard, HUP has submitted to the Government several key proposals it considers to be in favour of the above-mentioned objectives:

 · Increase of the amount of non-taxable receipts

· Reduction of the profit tax rate to 12% for all entrepreneurs

· Decrease of income tax rate from 24% to 14% and from 36% to 30%

· Broaden the non-taxable benefits that can be paid or made available to workers (meals, additional health insurance payments, employees placement)

· Increase of the threshold from HRK 3 million to HRK 15 million to pay VAT upon paid invoice

· Withdrawal of the proposal on increase in determining the monthly base for calculating the contribution of a member of the management or executive director 

· Applying a reduced VAT rate to additional categories (non-prescription medicines, fresh and frozen fresh meat products, dairy products, bee products, fuel, newspapers and prints, public transport of passengers, buildings and refurbishment of residential areas, nautical port , accommodation and catering services)

· Tax incentives for citizens to invest in housing and its maintenance

· Additional increase in the tax-recognized cost of using personal transport  up to 70%

Also, Croatian Employers' Association does not support the current pension reform proposal, i.e. it only supports some parts:

The HUP supports proposals for early retirement but considers that the age of up to 67 cannot be applied to all kinds of jobs and that Government should find a legal solution that will allow this boundary to be lower in certain workplaces.

The HUP cannot support the return of citizens’ pension savings to the 1st pillar which has proved unsustainable. This is a result of negative demographic trends and increased emigration of young, active citizens. The pension system should look for a long-term viable solution, and the current proposal is not. CEA proposed to strengthen the 2nd pillar and encourage savings in the 3rd pillar.  Also those who are participating in Pillar 2 should have right to an additional 27%, proportionally to their first pillar payments.