In the latest IPF Note, Ivica Urban analyses the tax burden on labour income in Croatia and compares it with selected EU countries. Although Croatia’s overall burden is around the European average, its tax system is not competitive enough to retain top experts.

The Note examines possible tax changes that would further reduce the tax burden on employees with high incomes. Among the proposals are: introducing a maximum contribution base for health insurance (set at five times the average gross wage from the previous year), reducing the maximum base for pension contributions (to five times the average gross wage from the previous year), lowering the top personal income tax rate (to 25%), and increasing the threshold above which that rate applies (to €7,200 per month). Such measures would increase the net pay of highly paid employees and could be designed so as not to impose a significant cost on public budgets.

According to estimates, revenue from health insurance contributions would fall by €55 million (1.2%) in 2025, from first-pillar pension contributions by €14 million (0.3%), and from income tax by €51 million (1.8%).