 A good tax system is based on the following principles:  Efficiency  Equity  Effectiveness  Simplicity  Stability

 Efficiency – taxes must have as little as possible impact on relative prices  Equity – taxes must be justly distributed among the member of a community  Effectiveness – taxes must ensure a sufficient amount of public revenue to cover reasonable amounts of public expenditure  Simplicity – taxes must be simple and clear  Stability – the tax system must not change very often

Taxes can be divided in several ways:  according to the tax base  according to the level of government to which the tax revenue belongs (state and local taxes)  according to which section of the population they hit most (progressive or regressive taxes)

 Current tax system includes the following taxes:  Corporate income tax  Personal income tax  Value-added tax  Special taxes (excise duties) on certain products  Real estate transfer tax  Levies on the organisation of games of chance  County, municipal and town taxes

 Corporate income tax – porez na dobit  Personal income tax – porez na dohodak  Value-added tax – porez na dodanu vrijednost  Special taxes (excise duties) on certain products – posebni porezi (trošarine)  Real estate transfer tax – porez na promet nekretnina  Levies on the organisation of games of chance – naknade za priređivanje igara na sreću  County, municipal and town taxes – županijski, općinski i gradski porezi

 Article 51  Everyone shall participate in the defrayment of public expenses in accordance with their economic possibilities  The system of taxation shall be based on the principles of equality and equity

 The Croatian tax system is comparable to the tax systems of EU member states and is based on a number of direct and indirect taxes.

 A tax that is finally borne by a person (legal or natural) and cannot be shifted to another person.

 Corporate income tax  Personal income tax  Surtax on personal income tax

 A tax that is not borne by the one who pays it, but is most often shifted to others.  Taxpayers of indirect taxes most commonly shift the burden of these taxes through the price of their goods and services, onto the final consumer – the population at large (e.g. VAT).

 Value added tax  Excise taxes  Real property transfer tax

 Corporate income tax  VAT  Excise taxes  Taxes and social security contributions account for approximately 90% of overall budgetary resources

 The Republic of Croatia guarantees the same legal position on the market to all entrepreneurs (domestic and foreign)

 What are the foundations of the Croatian economic system?  What does the Republic of Croatia guarantee to foreign investors?  Is the Croatian tax system comparable to the tax systems of European Union member states?  What is the Croatian tax system based on?  How does Croatia deal with the problem of double taxation?

 The tax base for VAT is the sales price of all _____________ delivered or _____________ performed.  Taxpayers of excise taxes on oil products are _________________________ of oil products and government body for __________________________.  The excise tax rate on alcohol is ____________________ of absolute alcohol.  Excise taxes on beer are regulated by _____________________________________.  The excise tax rate on coffee is HRK 5 to 20 per kg, depending on __________________________________.  Second-hand buyers of cars have to pay ____________________.

 assessed, direct, indirect, estate, corporate  Croatia’s tax year is, in most respects, the calendar year. The country’s tax structure includes both _______________ taxation through income taxes and profit taxes, and ___________ taxation through value added tax. In addition, there are excise taxes, real ____________ tax and local taxes. Income taxes are ________________ on individuals. The profit tax is essentially a ________________ tax.

 Croatia’s tax year is, in most respects, the calendar year. The country’s tax structure includes both direct taxation through income taxes and profit taxes, and indirect taxation through value added tax. In addition, there are excise taxes, real estate tax and local taxes. Income taxes are assessed on individuals. The profit tax is essentially a corporate tax.

 Entrepreneurial freedom – poduzetnička sloboda  Free market – slobodno tržište, tržišna sloboda  Foreign investors – strani ulagači  Direct taxes – izravni porezi  Indirect taxes – neizravni porezi  Double taxation – dvostruko oporezivanje  Contributions - doprinosi  Real estate – nekretnina  Surtax - prirez