Croatian economy: desperate times equal desperate measures?

Croatia: Tax debtors’ pillar of shame Photo: novilist.hr

He has done it!

Croatia’s finance minister Slavko Linic has erected the  “Pillar of Shame”, naming individuals and companies that, in terms of average wage, owe tax – big time! Some 130,000 names are on the list published today by Croatia’s taxation administration office 

The published names include tax debtors in categories from/and above 100,000 HRK (13,330 EUR) for physical entities carrying on business, 300,000 HRK ( 39,990 EUR) for legal entities  and 15,000 HRK (2,000 EUR) for all other taxpayers (citizens). The format of the list on the website is such that searches are enabled via all three above categories of tax-debt amounts in every county of Croatia. A job made very easy for local snooping, no doubt.

So, anyone wanting to know whether his/her neighbour or the shop down the street hasn’t been paying taxes this is the place to visit.

According to Vecernji List portal the first 100 of tax debtor’s from Linic’s “Pillar of Shame” owe individually more that 20 Million HRK (2.7 Million EUR), while 3,000 of the legal entities owe about 15 Billion HRK (2 Billion EUR).

I expect the website will crash several times for overuse. Names of debtors are already being published, talked about and, undoubtedly, are likely to cause quite a stir and bitterness among people. Especially those who cannot receive a decent medical treatment in public hospitals (funded from taxes) and see a tax-debtor cruising about in a flashy car or prancing around the town square in top designer gear.

Whether this desperate move by Croatia’s finance minister will materialise in any significant tax revenue is yet to be seen. One assumes that all tax debtors susceptible to “scare tactics” had paid their debts soon after the minister announced the “pillar of shame” some months ago.

The possible and dreaded consequences of such “pillar of shame” include that the whole exercise becomes the butt of town square jokes and the individual taxpayer responsibility will sink deeper and deeper into blatant irresponsibility. Furthermore, the mere inclusion into the “pillar of shame” could easily provide an easy way out of business for many businesses – declare bankruptcy under public shame pressures, loss of jobs. This is particularly relevant given that Linic has said in recent days that company tax debts could lead to directors losing their private property to the debts.

Whether the old proverb “you can lead a horse to water, but you can’t make it drink” will be disproved by this desperate measure to bring invigorating revenue, and taxpayer behaviour modification, into a desperate economy is a matter worth following.  However, it just may be a politically valuable  PR exercise for the struggling leftist government and, that’s all. After all, they would want to be seen as “doing everything under the sun” to help the ailing economy make a U-turn into positive figures. But, even if the amounts owed in tax look high, the fact is that it’s barely enough for a very small bandaid on Bigfoot.

If Linic and Croatia’s government were more serious about fixing tax avoidance then, certainly, we would be seeing effective procedures and measures in place that would consistently police tax debts with ruthlessness. The kind of unforgiving monitoring that occurs in developed democratic countries. Human defence mechanisms can go “any which way” in the face of public shame exposure. Risky business, indeed. But, all things said – I do wish the “Pillar of Shame” good success. Ina Vukic, Prof. (Zgb); B.A.,M.A.Ps. (Syd)