engleski

Efficieny of tax incentives in Croatia

Croatia, as many other transition and developing countries, implements a large number of corporate income tax (CIT) incentives in order for example to attract foreign investments and to stimulate economic activity and new employment. The main goal of this paper is to investigate the efficiency of such corporate income tax instruments in Croatia of stimulating economic growth and economic activity. For that purpose in this paper, the corporate income tax rate and numerous tax holidays as well as other investment incentives will be observed as one of the major tax incentives in the Croatia. Further, the econometric analysis will determine the relation and the impact of the corporate income tax on economic growth, and in that context the efficiency of the corporate income tax incentives in Croatia will be analyzed. The paper methodology includes multiple regression in which economic growth will be observed as a dependent variable and corporate income tax revenues as an independent variable. As a conclusion the regression analysis confirms a small but positive and significant relationship between corporate income tax and economic growth in Croatia. Because the tax incentives are included in the corporate income tax system, induction of gained results confirms the hypothesis that tax incentives have limited efficiency in stimulating the economic activity in Croatia.

tax incentives ; corporate income tax ; Croatia

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