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How hard does the tax bite hurt? Croatian vs. European worker

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Author Info

  • Ana Grdoviæ Gnip

    (Department of Economics and Tourism “Dr. Mijo Mirkovic” Juraj Dobrila University, Pula)

  • Iva Tomic

    (The Institute of Economics, Zagreb)

Abstract

The main objective of this paper is to analyse the tax burden in Croatia and to find out whether and how the size and the structure of total labour costs affect the functioning of the labour market. The tax wedge, together with employment and unemployment rates, is brought into play to classify EU countries and Croatia into clusters using K-means and hierarchical clustering. The results show that Croatia is classified among countries with a high tax wedge and a high unemployment rate. The same holds when, instead of the tax wedge, personal average tax rate is considered. However, in Croatia most of the tax burden is borne by the employees, not by the employers. Thus, the average Croatian industry worker bears a relatively high tax burden, which is exacerbated when the newly introduced “crisis tax” and increased VAT are taken into account.

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File URL: http://www.ijf.hr/eng/FTP/2010/2/gnip-tomic.pdf
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Bibliographic Info

Article provided by Institute of Public Finance in its journal Financial Theory and Practice.

Volume (Year): 34 (2010)
Issue (Month): 2 ()
Pages: 109-142

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Handle: RePEc:ipf:finteo:v:34:y:2010:i:2:p:109-142

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Related research

Keywords: tax burden; tax wedge; (un)employment; cluster analysis; Croatia; EU;

References

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  1. Primoz Dolenc & Milan Vodopivec, 2005. "The tax wedge in Slovenia: international comparison and policy recommendations," Financial Theory and Practice, Institute of Public Finance, vol. 29(3), pages 229-243.
  2. European Commission, 2010. "Taxation trends in the European Union: 2010 edition," Taxation trends 2010, Directorate General Taxation and Customs Union, European Commission.
  3. European Commission, 2008. "Taxation trends in the European Union: 2008 edition," Taxation trends 2008, Directorate General Taxation and Customs Union, European Commission.
  4. Eamets, Raul & Masso, Jaan, 2004. "Labour Market Flexibility and Employment Protection Regulation in the Baltic States," IZA Discussion Papers 1147, Institute for the Study of Labor (IZA).
  5. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR & CES & MSH, vol. 15(30), pages 47-104, 04.
  6. Marek Gora & Artur Radziwill & Agnieszka Sowa & Mateusz Walewski, 2006. "Tax Wedge and Skills: Case of Poland in International Perspective," CASE Network Reports 0064, CASE-Center for Social and Economic Research.
  7. Alberto Behar, 2009. "Tax Wedges, Unemployment Benefits and Labour Market Outcomes in the New EU Members," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 3(1), pages 069-092, March.
  8. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
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Cited by:
  1. Corbanese, Valli, 2011. "Supporting strategies to recover from the crisis in Croatia, the former Yugoslav Republic of Macedonia and Serbia cross-country report," ILO Working Papers 467146, International Labour Organization.
  2. repec:alu:journl:v:2:y:2012:i:14:p:24 is not listed on IDEAS

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