Helena Schmidt (Deloitte Croatia): The Effects of Increasing the Personal Deduction Are Not That Significant

After the departure of the long-time head of the Croatian office of the global consulting firm Deloitte Dražen Nimčević from his partner position to an advisory role, Helena Schmidt, a partner in Deloitte’s Tax Department, took over his role as office leader. She has over twenty years of experience in tax consulting for clients, is an internationally recognized expert in indirect taxation, and is regularly named the best expert in indirect taxation in the International Tax Review publication’s selection.

At Deloitte Croatia, she leads a team specialized in all aspects of value-added tax and excise taxation, as well as a team responsible for accounting, reporting, and providing services in a model where clients outsource their accounting and tax functions to an external expert partner. She is also the head of the initiative for the development and coordination of clients and industries in Central Europe within the tax function and a long-time leader of SheXO, Deloitte’s initiative to promote diversity in various areas of management and organizational structures. Schmidt shared with us the current challenges of the consulting business and reflected on the entrepreneurial structure and economic framework for the development of Croatia.

You have taken on a leading role at Deloitte. What is the current distribution of responsibilities and how dependent are you as an office in Croatia on the global network?

– I have almost grown up at Deloitte. Although twenty years of experience in a company sounds like a lot, it is never boring in this business. Over the years, you take on new clients, obligations, and tasks, as if you have changed several companies. Given that I know the company in all its segments, as well as our clients, it was natural for me to take on the role of office leader after my predecessor, who will continue to focus on talent development in the company in his advisory role. Deloitte has been in Croatia for over 25 years and during that time has established a prominent position by providing high-quality services. With more than 250 experts, it provides services to successful multinational business entities, some of the largest national business entities, and many regional fast-growing small and medium-sized enterprises. We are also proud that we have a gender-balanced structure, with three male partners and three female partners, and we generally promote gender equality at the regional level.

The main goal of this government’s tax reform is economic growth and improving the standard of living for residents. Will the announced measures truly contribute to this?

– While any increase in purchasing power is welcome, the effects of increasing the personal deduction are not that significant. Regarding the surtax, it is up to local governments whether they will, like Zagreb, increase the income tax, after which nothing will change for people, or whether, as some mayors have announced, they will make some redistributions or count on economic growth that will bring equal tax revenues as before the abolition of the surtax. We will have to wait and see; they have time until the end of the year. What has flown under the radar, which we consider an important and positive shift, is the correction of the VAT obligation for entrepreneurs with bad receivables, so they do not have to pay tax on deliveries they have made but never collected. We also welcome the change in the tax treatment of the allocation of shares in limited liability companies. It will no longer be taxed as dependent work but will have the same treatment as the allocation of stocks. We find many good elements in the tax reform, but in Croatia, we still have many passive income sources from rent and many forms of income that are taxed lump sum. It is not just about paying a small tax but also about minimal pension and health contributions.

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Helena Schmidt

photo Rene Karaman

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Do you see a solution in property tax?

– Without a comprehensive analysis, it is difficult to answer that question. When we talk about countries that have introduced this tax, the idea was not for people to lose their properties due to the height of the tax, but for it to be similar to the amount of utility fees. Various solutions are possible: the tax can be arranged so that it is not paid on properties where people live, but is paid on the third or fourth property. Abroad, this tax is also paid by companies, but the percentage of the tax burden can be reduced if those properties are used for conducting business activities that are in the interest of the state.

When you gather Deloitte’s recent research, what awaits us in the near future and what factors will determine it?

– There is hardly a week when our experts are not at some workshop on artificial intelligence. Both globally and locally, we are deeply involved in this: we monitor everything while paying attention to security aspects. The best results will be in those professions that will combine knowledge from their field using this tool. From a tax perspective, countries that had high social costs and various measures during the COVID-19 pandemic are now careful not to let their tax base erode and are therefore trying to create a tax framework for digital platforms and the taxation of intellectual property. In the M&A segment, the market is still very active, but investors are much more cautious, requiring greater discipline and a shorter return on investment period. The quality of audit reports has become a priority and will be increasingly sought after and valued. When it comes to risks, ESG, which sounds like regulatory imposition to many, is an inevitable fact. We have taxonomy, and it will be harder to manipulate and hide data. Work will continue on diversifying supply chains. Everyone must be ready to respond very quickly to the changes ahead of us because those who are prepared for rapid adaptation will be successful.

Read the full interview in the new printed and digital edition of Lider.