The Voice of Entrepreneurs Association (UGP), the Association of Croatian Small Dairies, the Association of Pag Cheese Producers and the Group of Meat Industries believe that the VAT on food products is too high and are demanding a single rate of five percent.

High VAT rates on food adversely affect the operations of numerous producers of the dairy and meat industry and significantly threaten their competitiveness on the domestic and foreign markets, according to a press release the associations published on Tuesday.

They noted that as of April 1, 2022, the VAT on butter and fresh meat and fish was reduced to five percent from 25 percent and 13 percent respectively, but that the VAT on milk, that was increased in 2013 from zero to five percent, remained the same.

Unfortunately, the VAT reduction did not include products such as fermented dairy products, cheese spreads, meat products, salami, and prosciutto, which are still taxed at 25 percent VAT, as are frozen meat and fish, the associations said, noting that this significantly reduces the income of large producers who fail to sell fresh meat and fish in a certain period of the year.

They believe that by neglecting these categories, the government has jeopardised the business of producers from the dairy and meat industries, mostly small ones.

This move has created a complete imbalance in the competitiveness of domestic and imported products because Croatia is not aligned with the practices of other European countries where VAT on food ranges from zero to ten percent, which is why sales of imported dairy and meat products are booming, while at the same time domestic production in Poland is protected with a zero percent VAT rate on food, the press release says.

The associations believe that Croatia’s entry into Schengen represents the right time to reduce VAT on dairy and meat products and that such a move would contribute to the recovery of the national economy.

“We have by far the highest VAT on food in the EU. It is high time for a single rate of five percent if we want to have competitive food producers,” said UGP head Hrvoje Bujas, adding that the 5% VAT rate should be introduced as soon as possible.