Has Coronavirus Crisis Revealed Croatia's Ability for Efficiency After all?

By 28 April 2020

As Ana Blaskovic/Poslovni Dnevnik writes on the 28th of April, 2020, much like if Croatia was placed under a strong magnifying glass, the coronavirus pandemic has showcased the many inefficiencies and the illogicality of the current Croatian system surrounding the economy.

At the same time, it has shown us that a change for the better is indeed more than possible and that the efficiency of the Croatian public apparatus is not a mere myth but a possible reality. What a shame it has taken a global pandemic to bring that to our attention.

When there has been no alternative, government institutions have proven their ability to be fast paced, their readiness to embrace digital processes and to become goal driven. Although whether or not the grants of 4,000 kuna for job retention are an optimal measure or not, the decision has been made and the application and payment process have carried out very well by the Croatian Employment Service and the Ministry of Finance.

The rapid introduction of e-passes (e-propusnice) shows that Croatia is ready at all levels to introduce and implement modern and digitised processes, but at the same time, the number of issued e-passes points to an over-fragmentation of the territorial organisation.

The introduction of Andrija showed truly excellent cooperation between Croatian and foreign companies in the creation and perfection of a smart and innovative technological solution. The state apparatus is enormous, and the number of people who can truly complete actual projects and tasks sought by the public is very modest, which makes it seem as if Croatia is not taking full advantage of its opportunities and potential at all.

If the ongoing coronavirus crisis has taught us something, it's that Croatia can indeed be efficient and orderly, and our biggest fear now should be us simply going back to our old and outdated ways under the pressure of the loud and self-serving minority who don't want to evolve or respond to change.

After the initial hesitation, the aid measures for the Croatian economy aimed at the right goal. The proposals were addressed to the Croatian Government from various institutions, and in fact, these economic measures should make the Croatian economy agile, fast, resilient and ready for the upcoming market struggle.

Coronavirus came knocking at Croatia's door when it was in a totally unprepared state in many ways. The idea of working from home, while popular, isn't adequately regulated in Croatia and this is one of the issues that needs to be addressed urgently independent of the coronavirus pandemic, since working from home is a trend that absolutely must survive even after this threat is history. It's a way for working parents to cope better, and it's a way to give young people more flexibility.

Croatia is also missing a real grasp on the idea of putting people on ''standby''. In fairness, the country did have something similar during the war, and we'd do well to incorporate an upgraded version of that in the present extraordinary circumstances. Slovenia put its workers who were unable to go to work on a ''standby'' basis and secured 80 percent of their wages, freeing employers from too much burden, who were already struggling to preserve their business bases.

AmCham also demanded that such workers in Croatia be allowed to receive, if not the Slovenian, French or British variant of the payment of 80 percent of their net salaries, or the Czech Republic's payment of 60 percent of their net salaries, then the amount provided by the CES, with certain employer obligations needing to be met along with it.

Although the argument against that is the fact that the Croatian solution allows for the payment of 4,000 kuna net irrespective of whether the employee is working or not, the employer has an obligation to pay the rest of the person's wage up to their usual full pay, and it is therefore still necessary for them to go through the whole long and exhausting administrative process with workers who aren't currently working in order to reduce the salary in these circumstances when all the time available should be focused on keeping the basics of the business, retaining customers, suppliers and employees who are still able to work.

Croatia has chosen the egalitarian principle of support for maintaining jobs with a net cash sum of 4,000 kuna. The argument for such an approach is certainly the simplicity that allowed for its speed of implementation. Despite its shortfalls, this measure protects, above all, lower-paid jobs and lower-valued industries.

However, this approach increases the chance of seeing highly specialised professionals become unemployed, and as such weakening Croatian firms in the aftermath of the coronavirus crisis when they return to the market. In addition, better-paying jobs, on a regular basis, contribute more to the budget, so it would be fair for them to be able to get more in the crisis.

How can we re-launch the domestic economy?

The tax and contribution write-offs for those affected by the coronavirus crisis are only for small businesses with a high turnover decline. Such a measure doesn't allow other companies a good start with re-beginning business operations, but instead becomes a heavy weight. Retaining workers with a delay or the partial write-off of taxes and contributions means that months or years after the re-launch of ''normal'' business, companies will continue struggle with the burden of these fees.

Large companies with a fifty percent or more drop in turnover, which is already a bankruptcy threshold for them, are allowed a proportional write-off of their regular taxes and contributions.

Given that it is crucial that in the period following the cessation of these special coronavirus-induced circumstances, economic operators must be able to initiate economic recovery rapidly. So it must be considered essential that economic operators aren't continually burdened with the tax liabilities that arose during the crisis. Coronavirus could finally bring a more significant cut in para-fiscal levies as a measure of easing the burden on the economy.

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