The Croatian Employers Association (HUP) said on Thursday that it was shocked by the government's bill on excess profit tax, noting that the tax was discriminatory and put the most successful companies in Croatia in an unfavourable position.

“The tax penalises the most successful companies in our country, those that fill the budget the most, employ the most people, pay the highest salaries and invest the most,” HUP said.

Companies in Croatia do not make excess profits, the profit earned this year barely makes up for the losses from previous years and it is totally unclear why the government is doing this, HUP said.

“We are in for a crisis and recession next year and we do not know how deep it will be. What we do know is that Croatian companies are seeing orders being cancelled and that we now need the strength to survive the recession and keep jobs,” HUP said, noting that the proposed tax would stop investments in development, which would result in lack of new jobs and wage growth.

We will again become a country unattractive to do business in, HUP said.

It noted that along with Hungary, Croatia is the only EU country that applies the tax to the entire business sector instead of only the energy sector, as envisaged by the relevant EC regulation, given that the energy sector had earned unexpected profits due to market disruptions caused by the war in Ukraine.

“Also, the tax cannot be introduced retroactively for 2022, since investment and employment plans have already been realised. This proposal will unjustly penalise the most successful companies, the best employers and the biggest investors with the highest budget contributions,” said HUP director-general Irena Weber.

Instead of new taxes, HUP advocates a full tax reform reducing more strongly the tax burden on wages through an increase in personal tax credits and lower income tax rates.

“That will help strengthen the economy, attract new investments, increase wages and create new jobs,” HUP said.

PM: Excess profit tax is not a penalty for success

Prime Minister Andrej Plenkovic said earlier in the day that the introduction of the excess profit tax was not about punishing successful ones but a solidary contribution that would directly help the weakest ones.

“Essentially, it’s a contribution to solidarity. This is a crisis which demands of those who have more to help those who have less,” he said.

Under the bill on excess profit tax, presented by Finance Minister Marko Primorac, companies whose revenue exceeds HRK 300 million this year will pay additional profit tax at a rate of 33%, but only on profit which exceeds their four-year average by 20%.

The base tax will be established by calculating the average profit enterprises made in 2018, 2019, 2020 and 2021, to which 20% will be added, and everything over that will be taxed by 33%, he told the press after a cabinet session.

The bill will be put to public consultation today.

The tax will be a one-off tax and will be collected in 2023.