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

Author

Listed:
  • 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.

Suggested Citation

  • Ana Grdoviæ Gnip & Iva Tomic, 2010. "How hard does the tax bite hurt? Croatian vs. European worker," Financial Theory and Practice, Institute of Public Finance, vol. 34(2), pages 109-142.
  • Handle: RePEc:ipf:finteo:v:34:y:2010:i:2:p:109-142
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    File URL: http://www.ijf.hr/eng/FTP/2010/2/gnip-tomic.pdf
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    References listed on IDEAS

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    1. Stephen Nickell, 2003. "Employment and Taxes," CESifo Working Paper Series 1109, CESifo Group Munich.
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    5. 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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    8. Jan-Egbert Sturm & Bjørn Volkerink, 2003. "How to Measure the Tax Burden on Labour at the Macro-Level?," CESifo Working Paper Series 963, CESifo Group Munich.
    9. European Commission, 2008. "Taxation trends in the European Union: 2008 edition," Taxation trends 2008, Directorate General Taxation and Customs Union, European Commission.
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    12. Ivica Urban, 2006. "Progressivity of personal income tax in Croatia: decomposition of tax base and rate effects," Financial Theory and Practice, Institute of Public Finance, vol. 30(3), pages 207-231.
    13. European Commission, 2011. "Taxation trends in the European Union: 2011 edition," Taxation trends 2011, Directorate General Taxation and Customs Union, European Commission.
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    Cited by:

    1. repec:ilo:ilowps:467146 is not listed on IDEAS
    2. repec:alu:journl:v:2:y:2012:i:14:p:24 is not listed on IDEAS
    3. 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 994671463402676, International Labour Organization.
    4. Jarmila Rybová, 2015. "Cluster analysis in the field of taxation," Acta Oeconomica Pragensia, University of Economics, Prague, vol. 2015(3), pages 58-66.

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