The debates surrounding the new property tax and the double cautioning of small landlords through this tax and increased flat-rate fees per bed continue. Is this move by the ruling party good or bad, and why? We asked Petar Vušković, an independent economic expert and founder of the first Croatian economic think tank, the Center for Public Policies and Economic Analysis.
– There is no good tax. Even semantically, something that essentially represents tax pressure cannot be good. A tax can be fair or unfair in relation to the taxpayer. A tax cannot be useful either, because taxes are not determined; contributions are, for example. From the perspective of allocation, a tax can be rational or irrational, depending on the spending of tax revenue. Spending money is left to cities and municipalities, although the state will keep part of the pie for itself. The money of citizens essentially represents political power.
When increasing the flat-rate tax, it should be noted that the competitiveness of small landlords has already decreased. Over several tourist seasons, the tax authority has assessed small landlords in such a way that they had to pay tax on commissions from tourist platforms like Booking or Airbnb, and this has been the case for several years. This imposed tax was something landlords wanted to pass on to the market, increasing the prices of private accommodation, which consequently remained empty. Private landlords had a bad season. Those who rent apartments will know what I am talking about. Now you know what I think about the additional increase in the flat-rate tax. A tax cannot be good if we are not aware of its effects – says Vušković.
Otherwise, Vušković, after the announcement of the new tax in early September, listed ten arguments against the property tax that we published in Lider.
The question arises whether this way will achieve the proclaimed goals – a drop in property prices, an increase in the number of properties in long-term rental, tax relief on labor, etc.?
– Tax relief on labor is good, but not in a way that imposes an additional tax. The property tax will not affect the drop in property prices. Property prices are most closely related to the credit policies of banks, to the prices of loans, i.e., to the interest rates that define that price. The property tax will increase the number of registered tenants in the tax administration who already live in those ’empty apartments’. The number of properties after the tax should be exceptionally large to reduce rental prices. This could only happen if everyone wanted to rent out their property, but that is not the case for many reasons. Moreover, if the number of properties is not large, and I believe it will not be, the government should consider the possibility that such a tax will further increase housing costs for young people. Someone always has to pay the tax – emphasizes Vušković.
Thus, instead of decreasing, the tax burden is increasing. Vušković believes that tax relief should go in the direction of reducing VAT and advance payments of corporate tax. – It is important to know that many public services and investments depend on public money. We should reduce those public services that are unnecessary or represent unnecessary costs. This raises the question of how many good economists there are in Croatia and whether they are involved in public policies. The property tax will be left as an option for cities and municipalities. I wonder if cities and municipalities have made revenue projections based on the property tax that has been ‘thrown into their lap’. Then, have project priorities been defined, and have they been evaluated? History has taught us that politicians do not know how to manage our money. Recent scandals suggest the same. Politics is the curse of economics – believes Vušković.
