Abolishing the special tax on coffee would boost the competitiveness of the Croatian coffee industry in relation to neighboring countries and in terms of investment in sustainable business, innovation and employment, a panel organised by the employers' association HUP on Wednesday heard.

The head of the HUP Coordinating Committee of Coffee Producers and Distributors, Josip Budimir, said that special taxes were used to tax products with a harmful effect on human health, “and coffee is no such product.”

“A total of HRK 124.5 million is collected annually from this special tax, which accounted for 0.77% of total revenues from excise taxes and special taxes in Croatia in 2019. Such unfavourable tax treatment results in cross-border purchases, discourages personal consumption and negatively affects GDP, resulting in Croatia’s not being competitive with comparable neighbouring countries,” said Budimir, noting that the coffee industry wanted the tax to be abolished.

The special tax on coffee in Croatia currently amounts to HRK 6-20 per kilogram of coffee, or, together with other taxes, to up to 35% per cup of coffee, unlike Slovenia, where that rate is only 9.5%, it was said.

HUP director Damir Zoric said that in terms of taxation, coffee should not be treated as a luxury product and that the sector should be helped to become more competitive in relation to other countries in the region as well as most EU countries, whose tax systems do not treat coffee as a luxury product.

He said that 93% of Croatians drink coffee and that it is not just a product but an integral part of the culture of living in Croatia.

The State Secretary at the Finance Ministry, Zdravko Zrinusic, said that coffee taxation was not harmonised at EU level like excise taxes on alcohol, tobacco, energy products and electricity.

Excise taxes are imposed on coffee in Belgium, Denmark, Germany, Latvia and Greece, and the tax rate for coffee in Croatia is lower than in those countries, Zrinusic said, adding that the tax was a simple type of tax that was collected easily.

Franck coffee and snacks producer marketing manager Zvonimir Seki said that in 2020 the coffee industry employed 817 workers, and that three factories in Croatia produced and processed coffee, putting on the market more than 400 different products.

Seki said that investments in the sustainable procurement of raw materials and new packaging materials were higher and higher and that investments in the education of employees, retailers and consumers were regular. In 2020, the industry helped the hospitality sector with HRK 3.7 million in weathering the impact of the coronavirus pandemic, he said.