The economic reality

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nedjelja, 11. kolovoza 2013.

The marginal employer and the Croatian IRS

It has been promulgated that over the past couple of years, entreprenuers have been cheating the government by not paying their fair share of taxes. This would include tax avoidance and tax evasions.

Therefore, the new Croatian governement has implemented the so-called fiscal sytems, where all bills for provided goods and services have to be printed out, carrying a unique code. The seller has to give the bill to the customer, and the customer has to take it, with a THREAT OF BEING FINED IF HE/SHE DOESN'T. This way, the government decided to crack down on those who have not been paying taxes orderly and have been "taking to much for themselves" on the side.

The ludacrious part of the entire scheme is the matching of funds in the sellers treasury with the billing amount. This means, that if an entreprenuer has just a dollar in excess of the amount as per the billing documentation, the Croatian IRS swoops in, closes the business, strikes you with a fine and if you make a hassle about it, they start picking through your financial records, just like the ilk in Brussels seems fit to crack down on wealthy individuals who take care of their money and places it in tax havens, where they are not progressively taxed to a marginal rate of over 50%.

Lets make two assumptions regarding the tax avoiders/ evaders:

1. The people who fail to pay taxes out of the incapability of making the payments, due to the tax burden.

2. People who fail to pay taxes, by keeping more money for themselves.

We will prove that both entreprenuers are doing a GOOD thing for the economy.

Point one: The government in the first assumption clearly does not understand the marginal entreprenuer. This individual functions at the margin, by barely making breakeven, or a slight profit without the taxes. If the taxes were there, the businessman would have to close his shop and discharge his workers due to the the fact that the generated revenue does not cover overhead, fixd costs, insurance, maintenance etc. If he were to pay no taxes, we would actually GROW his business, and make his products CHEAPER for the average consumer, which may also complain on the businessman's apparent lack of "patriotism" by not paying taxes.

Point two: Funds aren't going to the government and to boondoggle projects (such as city water fountains and failed gymnasiums). Or even better, to the military (which has won a heroic war a decade ago and proved their worth), when there is no clear foreign threat to our borders.

If anyone decides to come to Croatia for a vacation, please be aware that you might be fined for not taking the bill (lets be honest, if you budget DURING your vacation, you souldn't be on vacation) up to 500 kunas and illegaly ask for your personal ID in the process. They may FORCE you as a TOURIST, out of a hotel you're staying at, because the hotel manager failed to pay a substantial VAT tax.

And alas, just to make a point, if you DID OVERPAY YOUR VAT obligations to the State, but you have a difference of THREE DOLLARS between your treasury and printed bills, THE GOVERNMENT WILL CLOSE YOUR BUSINESS!!

As the old saying goes: Buyer beware (of the lackies at the Croatian IRS).......

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