engleski

How Hard Does the Tax Bite Hurt? Croatian vs. European Worker

The main objective of this paper is to analyse the tax burden in Croatia and to find out whether and how the size and the structure of total labour costs affect functioning of the labour market. The tax wedge, together with employment and unemployment rates, is brought into play to classify EU countries and Croatia into clusters using K-means and hierarchical clustering. Results show that Croatia is classified among countries with high tax wedge and high unemployment rate. The same holds when, instead of tax wedge, personal average tax rate is considered. However, in Croatia most of the tax burden is borne by the the employees, not by the employers. Thus, the average Croatian industry worker bears a relatively high tax burden, which is exacerbated when the newly introduced “crisis tax” and the VAT are taken into account.

tax burden ; tax wedge ; (un)employment ; cluster analysis ; Croatia ; EU

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