Reduce Food Prices Through Lower VAT and Reduction of Parafiscal Costs

Raw material prices, especially for meat, oilseeds, cocoa, coffee, etc., continue to rise, so instead of blaming retailers for inflation and rising product prices, when it comes to food retail, it is necessary to act by reducing the state bite (especially through lower VAT on food, for which there is room compared to neighboring countries) and by reducing the parafiscal costs of doing business for companies in Croatia, in order to increase efficiency, as stated in this week’s Focus of the Croatian Employers’ Association (HUP).

In addition to a lower state bite aimed at potential price reductions, possible solutions lie in targeted social transfers to vulnerable categories of the population, easing investment conditions that have been proven to strengthen the productivity of investing companies, and medium-term increases in competitive agricultural and food production.

Finally, HUP calls for a gradual deregulation of liquid fuel prices, with the first step at gas stations along highways, starting with the beginning of the tourist season. Fuel prices in Croatia are still administratively limited, and as a result, the price of gasoline (Eurosuper 95) is among the lowest in the EU – according to data from May 12, 2025, it amounts to 1.44 euros per liter. For comparison, in Germany, gasoline costs 1.67 euros per liter, in Italy 1.70 euros per liter, and in Austria 1.48 euros per liter – all market-determined prices that more significantly reflect procurement, logistics, and market demand costs. There is no reason for Croatian taxpayers to subsidize fuel prices for foreign nationals.

Considering that fuel in Croatia is predominantly dispensed to domestic citizens outside of highways, the introduction of market prices exclusively on highways represents a logical and targeted step. Such a measure would allow distributors flexibility during periods of increased traffic, encourage investments in retail infrastructure and service digitalization, while simultaneously preserving social sensitivity towards the domestic population.

According to estimates from members of the HUP Energy Association, Croatia would remain a price-competitive destination for tourists arriving by personal vehicles even after market liberalization on highways, thereby eliminating a long-standing regulatory paradox – that Croatia is one of the few countries that limits prices under conditions of significant seasonal pressure, precisely where operational costs are highest.