Government incentives in Croatia account for some 3.5 percent of GDP, while in the EU they account for some 0.5 percent of GDP. Some sectors in Croatia account for more than 60 percent of that amount and in the EU they account for less than one-third, with most incentives being horizontal incentives, i.e. those intended for the entire economy.
These data are part of the paper "Government Incentives in the EU and Croatia", presented at a round table discussion in Zagreb on Monday. The event was organised by the Institute for Public Finance and the Friedrich Ebert Foundation as part of the project "Croatia's Integration with the EU: Challenges of Economic and Legislative Adjustment".
One of the authors of the paper, Ivana Jovic, said that statistics on the value of government incentives in Croatia did not exist, but that information obtained directly from the providers of government incentives (ministries, the Croatian Bank for Reconstruction and Development, the Employment Bureau, etc.) made it possible for the authors to estimate that government incentives in 2002 totalled 6.4 billion kuna or 3.56 of GDP.
If incentives to the Croatian Railways are deducted, government incentives in 2002 accounted for 3.48 percent of GDP. Without incentives for transport, agriculture and fisheries, they accounted for 1.58 percent of GDP.
At the same time, government incentives in the EU (railways not included) accounted for 0.56 percent of GDP, and without transport, agriculture and fisheries they accounted for 0.39 percent of GDP.
The distribution of incentives (agriculture and transport not included) reveals an even bigger discrepancy. Sector incentives in Croatia account for 60.8 percent of all incentives, while in the EU they account for 27 percent. In the EU horizontal incentives account for 50 percent and in Croatia for 9.2 percent of all incentives.
Instruments of incentives are unfavourable as well - in Croatia, direct transfers from the state budget prevail, accounting for 74 percent of all incentives. In the EU, these funds account for some 59 percent of all incentives.
Tax benefits in the EU account for 24 percent of all incentives, while in Croatia they account for only 2.4 percent.