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Croatia’s Tax Politics Killing Investment and Motivation to Work

CroatiaThe World Economic Forum (WEF) released its annual Global Competitiveness study recently, ranking Croatia in 77th spot out of 144 countries, but the effects of extremely high taxes and contributions in the country makes the situation a lot bleaker in reality. As a result of tax policies the nation languishes in 142nd place out of 144 when it comes to desired investment destinations and motivation to work, reports portal Index.hr

Absurdly low wages, coupled with massive tax and contribution burdens puts Croatia only just above Argentina and Italy as desired investment destinations. On a scale of 1-7, with 1 being the least motivating score for investment, Croatia sits at 142nd on the list of 144 countries, with a rating of 2.1. Investors are only more unmotivated to invest in Italy (2.0) and Argentina (2.0).

Bahrain tops the list (6.5), followed by the United Arab Emirates (6.3), Qatar (6.2) and Singapore (5.9). Of the countries in the region, Macedonia is the best placed (19th) with a rating of 4.5. Montenegro (4.0) is the next most attractive destination for investors in the region. The UK is in 25th spot, Malta 27th and Sweden 28th with a rating of 4.3, whilst the US and Germany are 34th and 36th respectively with a score of 4.1. Japan (71st) and Australia (74) had a rating of 3.7.

With wages so low in Croatia, and for the government only to take a good chunk of it in taxes, the motivation to work in Croatia is very low – placing it in 142nd place with a ranking of 2.2. Again only ahead of Argentina and Italy. Bahrain and Qatar (6.3) and the UAE (6.2) again topped the list of nations where motivation to work was the highest.

Croatia has one of the highest levels of personal tax rates in Europe, according to an annual report of personal tax and social security rates covering more than 114 countries by KPMG. Croatia, with an aggregate rate of 46.3 percent for income and complimentary tax, is third in Europe, behind Belgium and Greece. Italy and Germany were below Croatia in 4th and 5th place respectively, while neighbours Bosnia and Herzegovina were 19th, according to KPMG’s annual survey titled Individual Income Tax and Social Security Rate 2012.

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