The increased VAT rate in the first three months has brought disastrously bad effects to the catering industry, reflected in the decline in revenue and profit, the value of properties, and the halt of credit placements to caterers, which could negatively impact the tourist season and offerings in the coming years, warned this week from the Coordination of Caterers RH.
This Coordination gathers, as they say, representatives of both small and large caterers from all over Croatia, with the aim of demonstrating the negative effects of the VAT rate increase on catering services from the beginning of this year from 13% to 25%. They have prepared an analysis of the effects of this increase for the first three months of this year, which they emphasize is disastrous.
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– According to the first indicators of recorded business results of caterers during the first three months of this year, the catering sector is in an extremely poor position. Almost all caterers emphasize that the measures to increase the VAT rate to 25% have increased expenses in relation to revenues, which some caterers are trying to bridge with minimal price increases, while others, who do not want to lose revenue, are recording a decline in revenue instead of price increases, say the Coordination.
For 30% of caterers, profit has been halved, and investments have completely ceased.
The head of the Coordination of Caterers of the Primorje-Gorski Kotar County, Vedran Jakominić, emphasizes that the negative consequences are not only measured in revenues, burdens, and business results but also much broader, as the analysis of effects has shown three critical consequences of these, as he says, sudden changes in business conditions in the market, in the decline of business revenues, property values, and the blockage of credit placements.
– To meet the new tax burden, it was necessary to change the selling prices of catering services, which also led to changes in sold quantities. For caterers who maintained existing revenues by changing prices, which is about 30%, profit has literally been halved. For others, an average revenue decline of 10% has been recorded compared to the same period last year and an average profit decline of 85%, says Jakominić.
He notes that the Tax Administration, through increased activity, has unconsciously valued such data, which excludes the possibility of intentional hiding of revenue, since the observed facilities had already been under fiscalization supervision this year.
He also states that as many as 50% of owners of catering facilities in the Primorje-Gorski Kotar County have decided to announce the sale of their facilities, which consequently, along with a significant decline in business results, has completely devalued the value of catering facilities.
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– Facilities whose market value could be mathematically measured just a few months ago can no longer find buyers and have de facto become worthless. Even facilities in prime locations can, at best, expect a return of up to 50% of the initial investment from sales, which only partially alleviates the owner’s damage, and has completely disrupted the balance in the market along with the absence of investments from small entrepreneurs who feel punished for their entrepreneurial activity due to the implementation of tax reform measures, emphasizes Jakominić.
A bigger problem than before is now the credit placements from banks to caterers, as those that were in realization or pending approval have been halted, as well as new ones, which are completely impossible to obtain due to the decline in business.
Croatia with the Most Favorable Prices and the Highest Burdens in Catering
– Here we are not talking about an increase in the price of loans, but about a complete blockage of availability, and in addition, caterers across Croatia, whose services we all use, further state that they are hurt by public condemnations that label them as a sector that enjoys benefits and lives leisurely. They consider this to be extremely unfair conclusions and a consequence of the completely wrong image that has been created about them for years, and it is less known that in the past 10 years they have minimally increased prices, along with a constant rise in burdens, procurement, and all other prices, and have for years reduced their own revenues by adjusting prices to the purchasing power of domestic citizens and the competitiveness of the country on the tourist map, say the Coordination.
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They consider it sad and disastrous that Croatia is today one of the destinations with the most favorable prices and the highest burdens in catering, ranking last according to the World Economic Forum, and now caterers are left with only hope that the Government will have the strength to acknowledge the mistake and take certain steps to correct measures that bring nothing good.
They remind that they warned of all negative effects at the end of last year during the voting on the VAT increase law, assessing that everything happened due to a lack of understanding from the relevant institutions, which now leads to price increases, but also to the outflow of skilled labor and the inevitable reduction in the quality of offerings, and ultimately the financial realization of tourism on which the state heavily depends.
They believe that there will be less revenue in the state budget, and the possibility of greater inflows in the coming years is also decreasing, especially since a large number of caterers across Croatia emphasize that due to the decline in revenue they will have to close facilities and will be less able to care for the quality of offerings.
