Croatia Economy On A Wing And A Prayer

Croatian Finance Minister Slavko Linic  Photo: HRT

Croatian Finance Minister Slavko Linic Photo: HRT

Croatia’s finance minister Slavko Linic has not learned it seems from his failed step where he published the names of tax evaders – the Pillar of Shame – in order to drive significantly more taxpayers into compliance with tax laws.

It’s been just over a year since then and he is at it – again!

This time he has announced publishing the names of employers who do not and have not for months paid wages to their employees!

According to a fresh Croatian HRT TV report, employers who do not pay their employees are, in addition to tax evaders, to be placed on minister Linic’s public Pillar of Shame.  Croatia’s tax administration has recently published on its website the proposal of changes and amendments to the taxation law – and it’s about to add another category to this very public cyberspace: a new list of debtors – those who do not pay for the work done for them.

Special rules have introduced several measures in order to reduce the number of employers who do not pay wages to their workers.  The legislation on mandatory contributions provides that Tax administration may publish the list of employers not issuing wages to their employees; information needed to place a name on this new pillar of shame is reportedly easily visible in companies’ filed reports to the tax office.

Ministry of finance keeps emphasising that in order to strengthen financial discipline it’s decisive to ensure that all employers meet their obligations towards their employees in a timely manner.

Our job at the ministry of finance is not actually a penal procedure nor an implementation of measures in that part, but to make it clearly known to the citizens of Croatia who these employers are and which heads of those corporations are involved. We consider that every head of every corporation that cannot pay its workers knows what the law on bankruptcy says,” said minister Slavko Linic at a press conference in Zagreb on 22 July.

There are no reliable figures as to how many workers in Croatia are not being paid for their work. A figure of 100,000 was bandied around in Spring of 2012 when regulations came into force, which stipulated that wages cannot be paid out without also paying mandatory contributions and taxes.  Since then, a number of companies have declared bankruptcy so this number of working people without pay has most likely fallen to perhaps 80,000, increasing with that the number of the unemployed.

This translates to about 8% of the employed in Croatia who are not receiving pay for their work!

It’s estimated that there are about 27,000 companies in Croatia unable to meet their payroll obligations. In most, the workers turn up for work every day – hoping to recoup what’s owed to them, praying they won’t need to join the endless queues of the unemployed along the road that’s paved with economic hopelessness. They linger in anger, bitterness, disappointment, protests … after all it has become illegal for companies not to pay their workers, but not a single company or its head has been processed under the force of that penal matters law.

Indeed one cannot but conclude that minister Linic keeps introducing cosmetic, ridiculous measures through which hope for economic recovery can be detected but, in reality, the roots of economy’s dynamics are rotten to the core.  Dialogues between the government and the workers’ unions seem to be taking an increasingly antagonistic form as the government lashes out with unyielding resolve that often includes punitive measures (such as this new pillar of shame).

Linic hopes to introduce financial discipline among employers by forcing them to act in certain ways:

pay up or die!

But if the companies die – what then? Will there be another wave of privatization for cheap money?

Why doesn’t minister Linic create a pillar of shame with the names of public servants and other well-paid entrepreneurs and development bankers who have for years squandered public money, grants … without achieving a single positive outcome in the strengthening of trade environment within which companies could survive, and be able to pay their workers.

If you’re looking for a personification of the idiom “on a wing and a prayer” you’ll find it in Croatia’s minister of finance, or, indeed, in the whole of the Cock-a-doodle-doo government coalition.  The punitive, intimidating measures once seen under the communist regime are back with a vengeance in Croatia. Times of consultation and regard for all stakeholders’ needs when it comes to the know-how about economic recovery have still not arrived in Croatia it seems. That’s a pity for that lovely nation of working people who know how to and love to work; be productive.  Ina Vukic, Prof. (Zgb); B.A., M.A.Ps. (Syd)

Croatian economy: desperate times equal desperate measures?

Croatia: Tax debtors’ pillar of shame Photo:

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)

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