Tax system as a factor of tourism competitiveness: the case of Croatia

The main purpose of the paper is to determine the connection and mutual causality of the tax and hidden tax burden and their influence on the development of tourism sector and its competitiveness in Croatia. In the part on taxes burden the attention is dedicated to the corporate income tax (CIT) and the value added tax (VAT). In comparison to other countries, CIT rate in Croatia is not so high, while the current reduced VAT rate of 10% is only applied to accommodation services or accommodation with breakfast, half board or full board in all kinds of commercial catering establishments. The same VAT rate is paid on provisions on agency fees in connection with these services. Services support (the half or full board) and the agency fee are not included in the reduced tax rate. The section on the other tax burden includes an analysis of social security contributions and hidden fees. The Croatian fiscal system includes an extensive list of hidden fees, and neither the number of these different fees nor the way in which they are calculated is fully known. The paper focuses on those fees and non-tax expenditures that are important from the position of hotel businesses: monument fee, utility service payment for the use of the town estate and water allowance.