Croatia's tax system is maybe even better than the flat tax system, but we cannot attractively sell it as a flat tax system, Sanader said at the HUP's traditional Entrepreneurs Day, at which the Employers' Association presented its proposals aimed at simplifying the tax system and liberalising the labour market.
The PM said the government was opened to a flat tax rate (an income tax having a single rate for all taxpayers regardless of income level and type), adding however, that this system had not yet been proven to be better than other tax systems.
A flat tax rate is attractive from a marketing point of view, Sanader said, adding he had advocated this flat tax system while he was in the opposition and that he had not yet abandoned the idea.
He, however, stressed that the Croatian tax system was in many segments much better than the flat tax system, but that it needed to marketed.
Croatia must find its own model aimed at strengthening the economy, raising competitiveness and export, without neglecting social sensitivity, Sanader told employers.
The PM also advocated a true social partnership. Along with the tax system and liberalisation of the labour market, Sanader said the health and pension systems also needed to be reformed.
HUP representatives said it was very important that the Government was ready to include their proposal in the agenda of the Social and Economic Council's session. It is important to establish a constructive dialogue, HUP president Emil Tedeschi said.
Earlier today HUP proposed changes to the tax system, including the implementation of two income tax rates - 15 and 25 percent - the reduction of the contribution rate by seven points, the reduction of Value Added Tax from 22 to 20 percent and higher personal tax deduction.
Employers also proposed several measures aimed at labour market liberalisation - to enable employers to exchange workers and relocate workers to another position.
Employers believe that these measures would improve competitiveness, increase economic growth by two percent, employment by 2.5 percent, while the overall fiscal neutrality would be maintained.
The HUP's proposal is aimed at achieving a balance of three tax rates - profit tax, income tax and VAT. The profit tax rate should remain at the current 20 percent, VAT would be reduced to 20 percent. Income tax would no longer have rates of 35 and 45 percent but only 15 and 25 percent.
The implementation of new tax rates would put an end to the current situation in which labour tax is significantly higher than capital tax, which discourages investments in new jobs and employment, HUP representatives said.