The CEO of Pliva, Mihael Furjan, has once again earned the trust of the members of the Croatian Employers’ Association, which re-elected him as president for the next three-year term on Friday. He can only hope that his position in this term will be somewhat easier than in the previous one, during which a series of problems struck employers and entrepreneurs, from the pandemic, wars, inflation, and rising costs, to interest rates and a shortage of workers.
In his welcoming speech on the occasion of his re-election, Furjan stated that the current and future priorities of HUP are tax and non-tax relief for entrepreneurs, improving labor relations, ensuring the talents needed for the Croatian economy, as well as reducing inflation, better utilization of EU funds, systematically addressing demographic issues, and improving the educational and legal systems. We spoke with him for Lider about what awaits the Croatian economy in the coming years, as well as the future of the generic pharmaceutical industry.
Will this term in HUP be a bit more relaxed compared to the last one? What is the current position of the Croatian economy?
– Globally, this is yet another year of uncertainty and upheaval, from the war in Ukraine, the situation in the Middle East, to new uncertainties related to the Red Sea. We see that our world is changing, and this political uncertainty has consequences for supply chains. We are entering an uncertain year. Our largest economic partners, Germany and Italy, have entered technical recession or are on their way to it, which will certainly have some negative consequences for the Croatian economy.
Still, on a global level, we see solid growth, partly thanks to China, which, despite slowing down, still has a high growth rate; we see that America has good indicators, but most European countries are stagnating. Croatia has, in a way, so far avoided recession; we see that it continues to grow significantly, primarily thanks to personal consumption and wage growth, and we see that domestic demand is driving growth. It is difficult to predict which effect will be stronger now. For instance, exports are slowing down in several sectors, such as the wood industry. The decline in some sectors reaches up to fifty percent, which will negatively impact our growth potential, but so far, Croatia has avoided that negative scenario of entering a recession.
At the top of the goals for the next term, you mention tax relief. What is the focus?
– HUP advocates for a general reduction in the tax burden, especially a reduction in the burden of income tax and labor. Our position is that the same level of income should be taxed at the same tax rates, regardless of the source of that income. An example is the low taxation of short-term rental activities, which is one of the reasons for the significant increase in square meter prices in Croatia. In many countries, there are wealth taxes, and the first or second property is not taxed.
—
—
Typically, the excess of wealth is taxed; this is also advocated by the European Union. In Croatia, we have a relatively small share of wealth taxation. Everything goes to taxing labor, meaning that most of the state’s revenue comes from VAT, which is a regressive tax and affects citizens who spend less, who spend most of their income. The EU has provided recommendations on which direction to take, and we, as HUP, want to relieve labor because we need to be more competitive, and we believe that is the right path. The goal is to equalize tax rates regardless of the type of income.
How will the case of the extraordinary profit tax continue, is there room for lawsuits?
– The Constitutional Court has ruled that the Law on the Extraordinary Profit Tax was in accordance with the Constitution, but there were several dissenting opinions that confirmed exactly what HUP’s thesis was: that the Law was retroactive because it was passed a few days before the end of the year. Thus, the rules of the game changed in the last minute of the match. This is not in accordance with the laws and is not fair. Moreover, it is clear that the Law was a reversal of the EU’s idea to collect more taxes from those whose profits fell from the sky. In Croatia, it was applied to all sectors, so those whose profits increased, regardless of the reason, had to pay extra.
We believe it is unconstitutional to punish someone because we still have different tax rates, from 10 and 18 percent, and then some had to pay 30 percent tax even though they may have had exactly the same amount of profit. It is not fair that different taxes are paid on the same amount of profit; we are not all equal before the law. The fact that the government has withdrawn from this tax for the previous year proves that it has also realized that it made a bad move for Croatia’s image as an investment destination. It sent a bad message to everyone who intends to work in Croatia and invest in it because if such a tax was once imposed, why wouldn’t it be again? We positively assess that it recognized this effect, and HUP can, of course, continue to prove that this law was not in accordance with European acquis. It is possible that we will go in that direction and consider legal tools such as those dissenting opinions that confirm what entrepreneurs have said, that this is an uneven and discriminatory decision.
What else do you seek and expect from the new government after the elections?
– We advocate for both tax and non-tax relief, less bureaucracy, and fewer transfers of money to citizens and businesses. It is not a good situation for the state to be the main driver and body that transfers money from one side to the other. We believe that taxes should be reduced and that individuals should be allowed to make their own decisions about what to invest in and what to buy.
We also discussed with Furjan the shortage of medicines, Pliva’s business, and the plans of domestic pharmaceutical companies. You can read the entire interview in the printed and digital edition of Lider.
