Croatia 2025 is a project run by the Center for Public Policy and Economic Analysis that advocates freedom and fact-based policymaking. That is why CEA wants to be a Croatian frontrunner in encouraging policy learning from good comparative practices. Our role models are Lithuania, Texas, Poland, Estonia, Czechia, Denmark, and other countries.
Based on indicators from global methodologies, CEA is the first in Croatia to bring concrete solutions for greater competitiveness and economic freedoms. This derives from many years of analytical work and a multidisciplinary approach. Moreover, we strive for an in-depth understanding of the complex background of policy risks that influence the decisions of political institutions regarding economic freedom and competitiveness.
The Croatia 2025 project means an opportunity to restart in the new year 2025 through the ambitious implementation of reforms. Reforms started through the National Recovery and Resilience Program and the National Medium-Term Fiscal and Structural Plan are considered.
That is why the project Croatia 2025, originally published in Croatian, lists necessary reforms for a more ambitious increase in competitiveness and freedom by 2030:
- OPPORTUNITIES FOR A LIMITED GOVERNMENT
- To open space for reducing inflation and taxes, limit general government spending (47% in 2023, Eurostat) to a maximum of 42% of GDP and strive to be as close as possible to the average of the Baltic countries. Defense expenditures should increase from 2 to 3% and, in the long term, to 5% of GDP, like in Poland. This is important because of geopolitical risks for transatlantic institutions and military aid to allies, according to the strategic interests of national security.
- Reduce the functions of state institutions and focus public policies on necessary classical and European affairs, i.e., introduce the New Public Management model.
- OPPORTUNITIES FOR A LARGER PRIVATE SECTOR
- Reduce the size of the public sector by directing many state-owned enterprises into the private sector and removing special voting rights.
- Increase space for greater private investment and research and development as the main driver of productivity.
- OPPORTUNITIES FOR LESS LABOR BURDEN
- Introduce a 15% flat tax on income, with additional space for local tax competition.
- Free reinvested profits from taxation and abolish advance payments.
- Abolish the special taxes on coffee, capital gains, and dividends.
- Reduce non-tax contributions (e.g., monument rent, renewables, forests, radio frequency spectrum, radio-television vehicle fee, additional registration of activities, etc.). The tourist board should be financed from the tourist fee.
- Abandon excessive rules of the “green” agenda (e.g., ESG) imposing burdens on businesses.
- Revise the minimum coefficient for calculating social security contributions of entrepreneurs and employees and introduce a sufficiently high threshold.
- Reduce the social security contribution for health care to 15% and reduce the contribution for the first pension pillar to encourage the voluntary pillar.
- OPPORTUNITIES FOR PERSONAL SECURITY
- The health reform requires more rational management of public hospitals and drug costs. It is important to enable competition in primary health insurance and tax refunds for private health services. Reduce exemptions from non-payment of participation and health insurance and control unjustified sick leave. Reduce the number of employer-funded days of sick leave from 42 to 20 (while it is even less in the Czechia and the Baltics).
- Pension reform requires strengthening the penalization of early retirement, encouraging market activation, strengthening personal pension savings, and providing greater relief for employers paying to voluntary pension savings of their employees.
- OPPORTUNITIES FOR MORE WORK
- Introduce vouchers for all educational services, following the Swedish model.
- Direct the educational reform towards a dual education model focused on practical skills and more subjects freely chosen by students, reducing unnecessary and burdensome curriculum and developing necessary skills for the market, critical thinking, democratic political culture, healthy living, financial literacy, and entrepreneurial initiative.
- Facilitate employment by increasing labor market flexibility as a key factor of competitiveness and economic freedom, combined with security for the unemployed through strengthening retraining programs and adjusting benefits during an active job search, under the flexicurity model, for example, in Denmark, the Netherlands, and Austria.
