Four business associations which gather American, Canadian, German, and Nordic companies doing business in Croatia, which represent the majority of foreign investors in Croatia, joined in opposing the government's announced plan to impose a one-off windfall tax in 2023 on all industries, rather than just on companies in the energy sector, according their joint statement released on Wednesday.

The American Chamber of Commerce in Croatia, the Canadian-Croatian Business Network, the German-Croatian Chamber of Industry and Trade, and the Nordic Chamber of Commerce in Croatia, said they are strongly opposed to the government’s plan to impose a tax which would apply in 2023 to industries operating outside of the energy sector, against the European Commission’s recommendations.

Although the European Commission had recommended EU countries to introduce a windfall tax for energy companies which saw massive profits due to skyrocketing prices of oil and gas since Russia’s invasion of Ukraine earlier this year, Croatia’s government decided to apply the tax to all companies, regardless of the business they are in.

Instead, Prime Minister Andrej Plenkovic’s government decided to simply tax all large companies, defined as posting more than 300 million kuna (€40 million) in revenues in 2022, and which posted a profit 20 percent higher than the four-year average between 2018 and 2021. While all corporate profits are taxed at 18 percent, any “excessive” profit exceeding 20 percent above their average would be taxed at 33 percent.

The measure is expected to hit especially heavily large companies in tourism, hospitality, and transport, whose businesses had barely survived the pandemic lockdowns and restrictions in 2019 and 2020, and which managed to rebound in 2022.

“This plan is clearly discriminating and not contributing to a fair economic recovery. The proposal will not contribute to economic stability in times of uncertainty for the future of business… This does not encourage foreign direct investment and/or reinvestment by foreign companies already operating in Croatia, and the proposed tax will only hamper efforts to attract foreign investment and the competitiveness of companies operating in Croatia.” the group said.

“In the challenging times ahead, especially for businesses coping with serious market disruptions resulting from the Russian aggression against Ukraine, close cooperation is needed between the public and the private sector to address economic problems as successfully as possible,” they added.

The government projects that the rule would apply to some 200 companies in the country, and the extra tax might bring in some 2 billion kuna (€265 million). The bill has not yet been sent to Parliament for a vote.

Although the business community has described the idea as a form of penalty for successful companies, Plenkovic in his public appearances insisted on pitching the plan as a “solidarity contribution that will help the weakest.” His Finance Minister, Marko Primorac, also insists that “the purpose of the tax is to redistribute profits, rather than punish entrepreneurs.”