UGP: For 'payers' above EUR 40 000 the increase in the grant is significant

The Croatian government has announced a decision regarding tax increases for self-employed individuals, sparking immediate concern among business organizations and entrepreneurs. According to the Ministry of Finance’s announcement, small self-employed workers with annual incomes below 40,000 euros will not face an increase in their contributions to the state starting next year. This change was made without prior analysis or consultation with representatives of entrepreneurs, according to the Union of Self-Employed (UGP). The move aims to alleviate some financial pressure on lower-income self-employed individuals, though it does not address concerns raised by those earning above this threshold. The decision follows earlier proposals that would have increased taxes for more than half of all self-employed workers. Under the new plan, the first three income brackets, those earning up to 19,900 euros annually, are exempt from additional contributions, extending this exemption to the next two brackets, which include those earning up to 40,000 euros. This means that approximately 83.4% of all self-employed individuals will remain unaffected. However, for those earning over 40,000 euros, the tax burden will significantly rise. For example, contributors in the sixth tax bracket, who earn between 50,000 and 60,000 euros, will see their payments increase by 66%, amounting to 3,033 euros, while those in the highest bracket will pay 5,728 euros annually. These figures represent substantial increases for many self-employed professionals. UGP has expressed disappointment with the lack of transparency and dialogue during the preparation of the final decision. The union argues that the government should have conducted comprehensive analyses, including impact assessments and a microsimulation test (MSP), before implementing such changes. It also calls for the inclusion of entrepreneur representatives in future discussions. “It is unacceptable to penalize an entire group of self-employed individuals simply because the state is unable to enforce order in a system it itself manages,” the organization stated. UGP further warns that the current approach could lead to closures among small businesses, emphasizing that even a modest increase of 1,350 to 3,000 euros per year can mean the difference between continuing operations and shutting down. The union highlights that the costs imposed on self-employed individuals are not taken from a hypothetical surplus but directly from their personal finances. They argue that the government should focus on addressing specific cases of misuse rather than applying broad penalties. “We are not asking for special treatment, but for fair rules that apply equally to all who comply with the law,” UGP officials said. The organization has also warned that if the government continues to ignore its concerns and fails to engage in meaningful dialogue, it may prepare for protests and mobilizations involving entrepreneurs, self-employed individuals, and their families. In addition to the tax issue, UGP has pointed out broader economic challenges facing small businesses. Dražen Oreščanin, a representative of the union, noted that inflation and rising costs have pushed many small enterprises to the brink of survival. He highlighted that the government's recent measures have created a negative public image, particularly among entrepreneurs who feel targeted despite their efforts to contribute to the economy. “People are very frustrated with these procedures, and they are compounded by other issues,” he said. “There is growing pressure for organized demonstrations, and realistically, we expect them in September if there are no positive results.” Oreščanin also criticized the government for failing to address the root causes of economic difficulties, such as the high cost of living and the lack of support for small businesses. He emphasized that the tourism sector, in particular, is struggling due to inflated prices and reduced tourist numbers. “The number of tourists arriving is not transparent, and many small operators are being unfairly blamed for the season’s poor performance,” he added. He also mentioned that the tax inspection service has intensified its activities, leading to the closure of several local businesses. “Some locations in Šibenik were shut down, and even iconic shops like Hajduk in Split were sealed off,” he said. “This has caused widespread dissatisfaction among restaurant owners and hospitality providers.” The situation has led to fears that many small businesses may close if the current policies continue unchanged. UGP has called for urgent action to protect the livelihoods of entrepreneurs and ensure that the government addresses systemic inefficiencies rather than imposing additional burdens on already strained sectors. As the debate over tax policy intensifies, the potential for large-scale protests looms, with the possibility of further unrest if the government does not respond to the demands of the business community.