Hoteliers Request Delay of Part of the Reform from the Minister of Finance

Hoteliers continue to demand that the value-added tax (VAT) rate on hospitality services be maintained at the current 13 percent, at least until the long-term consequences of increasing it to 25 percent on tourism and the overall economy of Croatia are determined, it was stated on Monday at the conference of the Croatian Employers’ Association in Hospitality (UPUHH).

The president of UPUHH, Ronald Korotaj, emphasized that there is still hope for a delay of part of the tax reform, as no one knows what the long-term effects of the new burden on hospitality and tourism could be.

“Our request, and we believe there is room for discussion with the Minister of Finance, is to keep the VAT on hospitality services at the existing 13 percent. We believe that changes are possible in part of the proposed tax reform,” said Korotaj.

The umbrella hospitality association proposes to the government that the change in VAT in tourism be viewed in the long term, not just over a one-year period.

“It should be discussed in more detail and broadly what impact raising the VAT rate will have on tourism, but also on the overall economy. With this measure, we are directly targeting the highest quality part of tourism, which we believe has the greatest growth potential in the upcoming period,” Korotaj believes, adding that the proposed measure would most harm quality tourism and that it could happen again that tourists come to Croatia with fully packed trunks of food.

He also pointed out that the proposed tax reform contradicts the Strategy for the Development of Croatian Tourism, and thus the entire economy, given the share of tourism in GDP.

He emphasized that a higher VAT rate cannot be incorporated into final prices, as the market would not withstand any increase in arrangements greater than one percent, which is the inflation rate at the level of the European Union.

“If, however, we keep the price of the service at the same level as before, but a larger amount of VAT is included in that price, our investment potential decreases,” says Korotaj. In addition to making Croatian tourism and hospitality even less competitive due to the new burden, the lost revenue for hoteliers due to the increased VAT is estimated to amount to hundreds of millions of kuna annually, while the lost investment potential could reach several billion kuna.

After today’s meeting with Finance Minister Zdravko Marić, representatives of UPUHH and professional associations HUP and HGK will again meet with the minister to try to convince him of the correctness of their theses by the end of the week.