There is no good practice regarding the taxation of capital gains and dividends at the level of the European Union, as taxes are so diverse that a common denominator cannot be found among all EU member states.
With a brief overview of international practice, Sandra Švaljek, director of the Economic Institute, opened the discussion at the Zagreb Stock Exchange conference on the topic of the Impact of Capital Gains and Dividend Taxes on the Capital Market. What can be observed, says Švaljek, is that most EU countries tax capital gains, interest, and dividends, and in the last decade, there has been a pronounced tendency to reduce the burden on capital gains, interest, and dividends. Some countries only have a capital gains tax on speculative investments, added Hrvoje Zgombić, a partner at Zgombić&Partners. – In Croatia, it makes no sense to introduce a dividend tax. Those who are deluded and think that it can collect funds for the budget are mistaken – emphasized Zgombić, adding that every tax leads to a reduction in trading volume on the stock exchange, which then affects lower employment rates and wages. The dividend tax is not fiscally significant at all, added Marija Zuber, an advisor from the Croatian Association of Accountants and Financial Professionals. From the perspective of attractiveness, she continued, it is more appealing for taxpayers to be subject to corporate tax rather than income tax.
If we were in a position where our external debt is not increasing, Švaljek added, we could consider taxing both capital gains and dividends, but we are far from that and are taking larger steps in the opposite direction. – Before introducing new taxes, it is necessary to adjust the expenditure side to the current situation, that is, to reduced revenues. We need to start from the expenditure side and simultaneously collect all possible taxes with an unchanged tax system. Only when all possibilities are exhausted should we think about measures on the revenue side – emphasized Švaljek. Zuber also pointed out the costs of labor. She believes that it is necessary to discuss social contributions when it comes to fiscal expenditures and revenues. In her opinion, these contributions should be considered, and this issue must be crucial in the upcoming period. – We must be aware that the tax burden is a necessary but insufficient condition for attracting investments – summarized Švaljek, also noting the importance of legal certainty. However, she continued, we should not ignore the fact that some neighboring countries, equally disorganized as Croatia, have introduced very low corporate and income tax rates. – We should consider a property tax because such a tax can motivate the real estate market and lead to a decrease in real estate prices. I see potential in such a tax, but we should not rush with it – she concluded.
