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Photograph: freeimages.com/robert_driese

Croatia is among those European countries with the highest perception of tax insecurity among entrepreneurs, primarily because of the frequent amendment of taxation regulations and the inconsistency of tax authorities, shows a survey by Deloitte released on Friday.

"The survey on taxes in Croatia and Europe" was conducted at the end of last year among 800 companies from 28 European countries - EU member and non-member states, including 18 Croatian companies.

Drazen Nimcevic of Deloitte Croatia explained that 72% of surveyed Croatian entrepreneurs assessed the domestic tax system as insecure and that as many as 89% considered tax insecurity in Croatia to be greater than in other countries. Nimcevic added that the perception of tax insecurity had grown constantly over the past three years since the beginning of the survey.

According to the survey, Croatia is ranked fourth for tax insecurity perception. The list is led by France and Bosnia and Herzegovina where 100% of respondents described the tax system as insecure. Italy is third, with a tax insecurity perception rate of 93%.

Croatian entrepreneurs, compared to those in Europe, are not that concerned about the amount of tax rates as they are about the insecurity regarding their tax obligations.

Asked what changes to tax regulations would best impact the economy's competitiveness, Croatian entrepreneurs cited greater security regarding the future of the tax system and tax rates (61%); predictability of tax authorities (39%); and simplifying the tax system (33%).

Nimcevic said that 85% of Croatia's budget is filled by consumption and income taxes while capital gains tax is relatively small and so tax authorities are more interested in taxable income that fills the budget. 

Other surveys conducted by Deloitte indicate that it is necessary to significantly reduce income taxes which are currently so high that they are demotivating and that the 'loss' incurred should be compensated for with capital gains tax. That would not deter investors, however, changes of that nature can only be introduced when investors in Croatia can indeed earn something, said Nimcevic.

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