Croats may not know much about Benjamin Franklin, one of America’s most influential founding fathers, but they are certainly getting to know about one of his most famous quotations: “but in this world nothing can be said to be certain, except death and taxes.”
That, at least, is the hope of the Croatian inland revenue, which last week – to the consternation of some, and the delight of many – published lists of 102,000 tax debtors. The list includes construction giants, high-profile business personalities, humble craftsmen and rock stars who, so the authority claims, owe the state some 52bn kuna (€6.9bn) in total.
Here is the list of 7,118 companies behind with their payments.
For now the inland revenue are chasing some 30bn kuna of this total – but that is still a hefty 40 per cent of annual general tax revenues, or some 23 per cent of all general government revenues, according to Sandra Svaljek, senior research associate at Zagreb’s Institute of Economics.
“There are expectations that the government will be able to collect half of this tax debt, but that is still 1.5 times the size of this year’s expected deficit. In any case, the size of the tax debt is extremely high and in my opinion the issue of tax debt should have been tackled long ago,” she says.
The media is generally supportive. The billions accumulated over the past 15 years is “hard to explain by any rational process,” wrote the popular daily Vecerni List.
Nada Cavlovic Smiljanec, who took over as head of the Croatian tax office since the ruling centre-left coalition took power last December, blamed the former government of the Croatian Democratic Union (HDZ) for the fiasco. She excused the tax office staff, saying the sums involved were too large for individual revenue inspectors to make decisions.
“These [tax debtors] were very close to the former Government, which allowed them to avoid their tax obligations, while at the same time, these entrepreneurs… were conducting lucrative business operations with the state,” Cavlovic Smiljanec said, according to business daily Poslovni Dnevnik.
A look at the top debtors would appear to support her point.
Tempo, a construction company, tops the list with 292m kuna (€39m) owed. It is 95 per cent in state ownership, while second slot is occupied by Croatian Radio and Television (HRT), the state-owned broadcaster, with 223m kuna in languishing payments.
But the accusations have led to a flurry of counter claims: both Tempo and HRT, for example, say they are in legal dispute with the tax office, and insist the sums supposedly owed are greatly exaggerated, while many companies and individuals argue that they are behind with payments because state-owned institutions have failed to pay their invoices.
Vercernji List also noted the absence from the 102,000 names of both individuals and companies close to any member of the government. “This is not because they do not have tax debts, but because they were able to ‘re-programme’ their debts in time,” the paper reasoned.
Meanwhile, the entrepreneur and individual lists contains a staggering 95,000 names in a country with a total population of 4.5m, including singers, well-known business and sports personalities and a former minister of defence.
Many dispute the tax office claims.
With Croatia set to enter the EU in less than a year, and desperate to shore up state finances, it’s clear that reform of the tax collection system is long-overdue.
“There are many who risked not paying taxes [in the past] believing that, because of political sponsorship or inefficient enforcement, they would go unpunished, and that their tax debt would eventually be written off,” says Svaljek.
But while many applaud the authorities for finally clamping down on often rampant tax evasion, others fear honest businesses suffering cash-flow problems are likely to suffer from over-zealous inspectors applying the letter, rather than the spirit of the law.
In Croatia, entrepreneurs say they face a barrage of costly, and time-consuming red tape; in a country facing economic stagnation this year, and with unemployment at 18 per cent, visits by tax inspectors keen to meet targets set by civil servants who have never worked in the private sector is the last thing the economy needs.