UGP: The introduction of a tax on excess profit according to the current proposal is meaningless and unjustified

According to unofficial information, the Government plans to introduce an additional profit tax that refers to the RePowerEU program and related directives. The Association of Entrepreneurs’ Voice has decided to comment on the introduction of the excess profit tax in its statement.

UGP believes that the introduction of a tax on excess profit according to the current proposal is meaningless and unjustified. Namely, according to that proposal, a rate of 33 percent is intended to tax all companies in Croatia with average annual revenues exceeding 300 million kuna and which had profits 20 percent above the average from the previous four years in 2022.

– We ask all authorities: how will the administration determine which companies profited from the rise in energy prices and which, for example, from investments in development, as well as optimization and efficiency increases that manifested this or last year? – UGP states.

– We remind you that the excess profit tax in the EU defined this broadly is only present in Hungary, while other EU member states and the European Commission propose taxing only the energy sector, which earned excess profits on speculative gas and electricity prices. The Government would also like to collect money from all companies that generate more than 300 million kuna in revenue – they emphasize, adding that during market uncertainties caused by high inflation, where companies are struggling for business survival, the introduction of excess profit will definitely halt potential investments and wage growth.

– We also question how the introduction of excess profit, i.e., additional expenses, would reflect on certain long-term financial and organizational plans, as well as employment plans. For example, a company that invested in R&D on time and successfully navigated the energy crisis will have to pay the state 33 percent more due to its capability and proper business optimization. Will that company continue its operations in Croatia? Will other companies that will have to pay higher taxes due to their capabilities remain operating in Croatia, or will we continue the trend of intellectual capital outflow? – UGP asks.

Many companies are already looking at how to adjust their activities to circumvent the proposed excess profit tax and find a ‘loophole in the law,’ so it is reasonable to assume that many companies operating based on sound business decisions and fairness will pay what they should not, which will only hinder their development, they state in their press release.

– If you want to drive entrepreneurs and investors out of Croatia, introduce nonsensical additional taxes. We are against this; it is simply bad – concludes Hrvoje Bujas, president of UGP.