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Institute of Public Finance

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

Ana Grdović, Department of Economics and Tourism "Dr. Mijo Mirkovic" Juraj Dobrila University, Pula, Croatia
Iva Tomić, The Institute of Economics, Zagreb, Croatia

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.

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

Year:  2010   |   Volume:  34   |   Issue:  2   |   Pages:  109 - 142

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 June, 2010
II / 2010
EBSCO Publishing
ISSN 1846-887X
e-ISSN 1845-9757
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