Change in the tax structure of the Republic of Croatia as a precondition for pension system reform

Abstract

The pension system of the Republic of Croatia is subject to frequent inquiries, which can be summed up in two basic directions: the question of its financing, ie the rate of pension contributions that negatively affect the competitiveness of the economy, and the issue of pensions paid, which are often perceived as insufficient for the dignified life of pension beneficiaries. However, in the long run, the pension system will face the need for a thorough reform that will be caused by the longer life expectancy of the population and the increasing negative demographic tendencies that are particularly pronounced in the Republic of Croatia. The current contribution-based pension system will be less and less able to service its growing demands, and the reform needs to achieve two apparently conflicting goals: efficient financing while stimulating the competitiveness of the Croatian economy. It will be possible to achieve this by carefully devising a change in the tax structure and shifting the focus from income taxation to consumption taxation.