Plenković on taxes for flat-rate entrepreneurs: 'Minimal measures for fairness'

Croatian Prime Minister Andrej Plenković has defended proposed adjustments to the tax system, characterizing them as "minimal measures" aimed at achieving greater fairness. These changes include minor corrections to contributions for the most successful flat-rate entrepreneurs and an increase in the fixed fee for tourist accommodation beds.

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When the government intervenes, not a peep. Now we pretend to be oblivious as if we haven't been taking measures that limited the price of derivatives at about 95 government sessions continuously after the Russian aggression against Ukraine, as if some magician brought everything down.

Responding to dissatisfaction from the Association of Glas Poduzetnika (UGP) regarding perceived "increasing tax pressure," Plenković highlighted the government's consistent efforts to mitigate economic challenges. He pointed to ongoing interventions in fuel prices and bottled gas, as well as measures taken during the COVID-19 pandemic, the energy crisis, and following earthquakes, which he described as creating a "shield" for the economy.

Plenković emphasized the positive economic indicators, noting that 1.8 million people are employed in Croatia with unemployment at 60,000, and the number of flat-rate entrepreneurs exceeds 100,000. He explained that the flat-rate system was initially designed for simplicity, allowing individuals not registered for VAT to deduct 85% of their income as expenses, with tax calculated only on the remaining 15%.

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As a society, we have moved forward, and the result is 1.8 million people working in Croatia, 60,000 unemployed, and the number of flat-rate entrepreneurs exceeds 100,000.

However, Plenković noted a trend where individuals employed in larger companies have established flat-rate businesses to continue the same work, effectively changing their status on paper to avoid taxes they previously paid. He argued that this practice undermines the principle of tax system fairness, prompting the government's intervention. The proposed corrections will affect the two highest tax brackets for flat-rate entrepreneurs, while those earning up to 40,000 euros annually will not see their contributions increase next year.

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This is the use of some loopholes in the tax system to simply change status and work on paper as if you were a flat-rate entrepreneur, who then does not pay what they paid until yesterday.