If you read the headlines it would seem that the end is near for Croatia. Young professional people leaving the country in a mass exodus leading to a huge shortfall of workers to service the one shining light, the tourism sector. Everyone is of course blaming everyone else for the tragic situation.
One of the arguments that constantly appears is “well if you paid workers more then they wouldn’t leave the country.” Laying the blame at entrepreneurs is missing the mark by miles. The problem is rightly the low salaries but this has very little to do with the business owners and everything to do with the greed, or should I say disorganisation of the government.
Maths has never been my strongest characteristic so I going to keep these calculations as straightforward as possible. If you pay your worker a salary of 10,000 Kuna net per month then you as the employer will have to pay around 18,000 Kuna gross. So in other words for almost every Kuna you reward your worker you’ll also reward the state another Kuna, give or take a few Lipa. If you pay slightly less, let’s say 7,000 Kuna, then you’ll be hit with a gross amount just over 12,000 Kuna. Of course the more you pay the more tax you pay. So much so that if you pay your workers 15,000 Kuna you pay the state exactly the same amount.
To give you some perspective on these figures I contact a UK employment agency to find how much employers had to pay in taxes in contributions. The results gave the exact answer why Croatian companies are struggling, why people are leaving due to low salaries and to what good organisation and a solid system bring. Again these figures are a rough calculation but you’ll get the point. The same salary of 10,000 Kuna, which converts to around £1,200, would mean that the employer would have to pay around 12,000 Kunas a month!
Even with my terrible maths that’s a clear difference of 6,000 Kunas a month. Or if you like it is 10,000 Euros a year more expensive to pay a worker in Croatia. Or if you like an employer could buy a new small every year in the UK. But quite possibly the Croatian employer, if they had the same financial benefits as a UK employer, would actually invest more into their workers and indeed products and business.
Private companies are becoming an endangered species in Croatia and when we delve into the brutal tax system it is easy to see why. There are around 150,000 active private entities and these few private companies actually employ people, pay taxes to keep the country’s budget flowing, create exports and earn money. These are the risk takers and they need to be rewarded not squashed like tomatoes in a spaghetti Bolognese.
And I have yet to mention all the other crazy taxes that are piled onto the shoulders of entrepreneurs, such as taxes for the Tourist Boards, forests, water and God only knows what else.
Private business is being slowly strangled to death. And why – simply because of the greed of the state. Greed and the inability to actually see the bigger picture. To actually realise that the future lies in the hands of up and coming young Croatian born businessmen and women who will take a risk by using their own money to start a business. Make the tax system more accommodating and not so restrictive and these seeds of business grow.
And in case you were wondering how much an employee with a salary of 7,000 Kuna in the UK would cost you, and hide your eyes if you are a Croatian business owner, a total of 7,600 Kuna in total. This is the root of the problem. As Shakespeare would say “Something is rotten in the state of Denmark.” Add this to the slow court system, corruption, snail’s speed of reforms and illogical state decisions and it is easy to see why the rolling hills of Bavaria and enticing for our workforce. Give private business half a chance to breathe, the results will be repaid ten times over.