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Reform Support

Measuring and reducing tax compliance burden on Croatian enterprises and tax administration

Funding Programme
Technical Support Instrument (under the European Recovery and Resilience Facility)
Year
2021

Supporting reforms to ensure efficient and effective revenue administration and public financial management

With this project, the Commission provided technical support to the Croatian Tax Administration (CTA) with the aim of helping the CTA understand the tax compliance burden imposed on enterprises and on its staff within the CTA. The technical support would allow the Croatian authority to reduce this burden through targeted measures.

Context

Croatian taxpayers, mostly SMEs, are overburdened with various tax obligations, which eventually slow down their business. Furthermore, the complexity of the tax system and high tax compliance costs have direct ramifications on the CTA and the provision of its services. Measuring and understanding the extent and causes of the tax compliance burden is a prerequisite for taking targeted measures to reduce this burden.

The project is linked to the Commission’s priority of supporting small business and fair taxation, and in line with the Commission’s package for fair and simple taxation.

Support delivered

At the end of the 17-month project, the authority has at its disposal:

  • a tailored methodology and survey based on the Standard Cost Model (SCM) to measure the tax compliance burden on enterprises;
  • a tailored methodology and survey based on the Standard Cost Model (SCM) to measure the tax compliance burden on the CTA; 
  • an analytical report with main findings of the quantitative and qualitative data analyses of the conducted surveys, and with recommendations to reduce the tax compliance burden, complemented by a gap analysis and implementation roadmap.

Results achieved 

The Croatian authority has, among other benefits, gained: 

  • reliable tax compliance cost ratios;
  • an improved understanding of drivers of the tax compliance burden on enterprises;
  • an improved understanding of drivers of the tax compliance burden on its staff within the CTA; 
  • an improved understanding of ways to reduce the burden.

A gradual roll-out of initiatives is expected over the next months and years in order to achieve the objective of reducing the tax compliance burden on enterprises and the CTA.