Croatian Entrepreneurs’ Association Urges Uniform VAT Reduction on Food

The Croatian Entrepreneurs’ Association (UGP) has urged the government to implement a uniform VAT reduction on food products, arguing that high VAT rates contribute to rising living costs and inflation. This call comes amid growing public frustration, with consumer groups organizing boycotts to protest price increases and Croatia recording the highest inflation rate in the eurozone at 4.5% in December 2024.

The Croatian Entrepreneurs’ Association (UGP) has called for a uniform reduction in the value-added tax (VAT) on food products, citing significant price increases that are affecting consumers. This appeal comes in response to consumer protection associations' announcement of a boycott aimed at highlighting high prices and what they perceive as the greed of traders, who they blame for driving inflation.

The call for a VAT reduction has gained support from both opposition and government parties, encouraging Croatian citizens to refrain from purchasing goods in stores, cafes, restaurants, and gas stations on a designated day to protest against unjustified price hikes. The situation is exacerbated by recent data indicating that Croatia recorded the highest inflation rate in the eurozone at 4.5% in December 2024, up from 4.0% in November. Additionally, suppliers have indicated further price increases due to rising raw material costs.

According to the Croatian Statistical Office, sectors such as hotels and restaurants have seen the highest annual price increases, with a 9.6% rise, while services overall increased by 6.7%. Food and beverage prices have also risen by 4.8%. The UGP attributes these escalating costs primarily to high VAT rates on food.

Croatia operates with three different VAT rates:

-      5%: Applies to basic foodstuffs such as bread, milk, eggs, fresh meat, fruits, and vegetables,

-          13%: Covers items like oil, butter, margarine, and baby food,

-          25%: Applies to all other food products not classified under the lower rates.

The UGP argues that Croatia's VAT on food is among the highest in the EU and significantly contributes to rising living costs. They also highlight systemic issues within the country, including labor shortages and low production levels that further complicate economic conditions for citizens.

The UGP's call for a uniform reduction in food VAT reflects broader concerns about affordability and economic stability in Croatia. As inflation continues to impact various sectors, including essential goods and services, the association emphasizes the need for policy changes to alleviate financial pressures on consumers.