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Impact of tax policy on employment and international competitiveness of the Republic of Croatia

This paper conducts analysis and comparisons of tax policies implemented in the Republic of Croatia and the European Union, in order to establish the impact of tax policy on employment and competitiveness, and thus the general economic situation. Conducted research leads to several conclusions and insights of which some are listed. It turned out that the sustainability of the central government budget depends on the tax inflows of value added tax and excise duties. In Croatia, income tax does not have an important function in encouraging individual economic decisions, as it has, for example, corporate income tax, but however that Croatia does not tax most income from capital, so it can be concluded that the Croatian system of income taxation of the individual income is consumption-oriented and in that part its role in attracting foreign capital can be considered positive. Furthermore, studies have shown that a tax rates of employment in Croatia (contributions on and from salaries, income tax) is disproportionately high to the debit of capital, compared to the OECD countries, and as a result of the high tax rates, there is increased unemployment and expansion of the underground economy. This leads to the loss of government revenue, and loss of competitiveness in international trade.

ompetitiveness ; tax policy ; tax wedge ; taxation ; employment

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