|
Post by francis on Mar 6, 2010 11:05:18 GMT 1
anybody, have the number of , 7 of 9 maybe she could explain things better, The Croats, really have been lead down the garden path, in there ability to think at the same time, people from the west, have been allowed to think. and still went down the path. this is a good time to make money, stop crying and just do it ) and keep clear of the crash.
|
|
|
Post by solitum on Mar 6, 2010 14:16:51 GMT 1
Solitum, If you tax the gross income higher there are 2 choices: 1. The workers will receive less Netto income, which means they can spend less money on buying products. Since the average salary already covers only 80 % of the average monthly cost, the mathematics become extemely simple...................people will not be able to pay their bills and the economy gets into deeper s.h.i.t. If you only do this yes, but that was not what I said I said 5 things you have to do. 1. Lower PDV on food, (especially healthy food) 2. Make companies restaurant visit fully deductable. 3. Increase land tax on second homes 4. Increase tax on higher incomes (if you have to start by 8000 or 10.000 gross is a detail) 5. Remove tax and contribution on production companies exporting Nr 1. Will benefit everybody an will lower cost of living, but the relative effect would be the largest by the people with low incomes Nr 2. Getting the service industry working, also in the winter half year could generate lots of jobs. Nr 3. Do to missing land tax the country ended in the current situation, so it would be smart thing to make sure it could not happen again. Nr.4 This is for the government to save money, alternative you could fire a large part of the people in the public sector, if you do the tax one you can keep there jobs Nr.5 Production companies exporting, this is best thing which can happen to any economic, if you stimulate this you could create lots of job, maybe you even will have the hard taxed people from the public sector, banks, insurance companies seeing opportunities in starting a business in this area. Anyway, this was my suggestion based on Boris question prior in this thread how to fix Cro economy Could it work – for sure it could Is it realistic – No Way? PS: I love the rule you have in the Netherlands, that should be implemented everywhere.
|
|
|
Post by mambo on Mar 6, 2010 17:53:34 GMT 1
Solitum,
It is a nice idea, but there will be several pitfalls.
1. Lowering the pdv on food I can fully agree with, especially on what we call first necessities, like water, bread, milk etc. However, what you buy in the supermarkets is not expensive because of the pdv.............it is expensive due to the inefficiency and working models of the supermarkets.
We used to deliver our products to the supermarkets and I can tell you, out of my own experience, I was flabbergasted by the ignorance, greed and complete absence of a competition model within ALL the supermarkets. All supermarket chains work with something called a 'listing fee', which means the seller of the product has to pay the supermarkets a monthly amount of money (e.g. 500 Kuna/square meter) or pay a one time fee to get access in the supermarket for 1 or 2 years. The result is that a company will have to pay close to 200,000 euro if it wants this single product in all of the supermarkets in Croatia.
On top of that most supermarket chains don't work with a central delivery system and will not allow you to use their empty trucks. E.g. we were located in Istria and if we wanted to deliver our product in Zagreb we had to drive there ourselves, with our own trucks, while empty Konzum trucks would drive back to Zagreb after making a delivery in Istria. Logic and efficiency would tell you that it is much cheaper if we would deliver our product to a logistical center and they would transport it from there. Does not happen.
On top of that most supermarkets work with profit margins of 40 to 50 % and the end result is a product which is so expensive that customers don't buy them anymore.
When the supermarkets would start working differently you could see prices drop like a rock, but it won't happen. If the government would lower the pdv I am 100 % sure the supermarkets would immediately raise the prices.
2. To make a restaurant visit fully deductable is a nice idea, but it won't change a lot. At the moment companies simply don't have any money, since there is not a lot of work to begin with. Companies have less income so they will not spend it on eating out in a restaurant.
Restaurants themselves however can do many things to increase their turn over. Now the concept is still the same, the food is still the same and in 10 years the food will still be the same. If I go to any restaurant in Istria and compare their current menu with that of 6 years ago...........it will be identical except for the price. Increasing the turn over of a restaurant is the responsibility of the owner and if the owner has no ideas...................it is his mistake, not the mistake of the government. Why have I never seen an 'all you can eat buffet' style here in Istria ? Why don't they have 'plat du jour' or 'food of the day' ? Just 2 examples of what could be done. But indeed, fishing in the local market is one, fishing in the tourist market would be much better.
3. Increasing land tax on second homes sounds nice, but it will increase the tax for a lot of families. Many times, at least here in Istria, you see the parents building a house for their son or daughter. They don't have the money so the parents will pay it first. This would be their second house, so taxing this house will mean lot's of people will not do this anymore. Taxing holiday homes on the other hand is a good idea, but be careful................if you increase the tax too high everyone will get rid of the holiday homes and you still end up without income. It will also wreak havoc in the real estate market. At the moment houses for foreigners are already extremely expensive, so don't make them more expensive.
4. Increasing the tax on higher incomes is possible, but like I said before, it is not going to get the government a lot of money, it is more a fashion statement. The amount of people having higher salaries is limited, so it is not bringing in hundreds of millions of Kuna's.
5. Remove tax etc on companies focussed on exporting..........................this already exists. For many years the government has given incentives to companies which agreed to invest in certain areas, which focussed on providing jobs etc. If a company solely exports it will be in free zone or will enjoy the incentives given by the government, which means they don't pay tax at all.
Biggest problem at this moment for exporters are.................the banks. Several companies have already closed their doors because of banks unwilling to provide guarantees for the credit the buyers need. In other words, there is still a demand for their products, but the customers cannot find the financing and thus the order is cancelled. The end result is a good working company closing it's doors. But this is a world wide problem, Croatia has to work together with other countries to solve this problem.
But within Croatia there is still lots of things to do. I know several European agricultural companies which wanted to invest in Croatia, but they met such opposition from the government that they gave up. This means land remains unused, jobs are not created, transport and other service companies don't find any work, it is completely idiotic.
Croatian wine industry ? All aimed at the local market and only a few companies do some export. Overhauling the wine industry can create a lot of extra income for a lot of people.
Innovating the tourism industry can also create jobs, but it will require a complete mentality change amongst all Croatians. Many Croatians have the mentality to work as little as possible, drinking a lot of alcohol during working hours, showing no initiative to improve service, still having a 7 - 3 mentality (operation dust cloud immediately at 3 pm). But this mentality starts already young.................at school. Children are not motivated to perform well at school, teachers have little motivation to teach the children well, it is a complete disaster. Well performing students do so because they feel the need to excel, not because they are triggered to perform well by the system, by their teachers or by anything else.
It sounds all very negative, but it is the reality. Croatia is, mentality wise, still stuck in the old Tito times. Few people and companies feel the need to deliver quality, service for a normal price. Try calling someone in the middle of the night because your machines have run into problems and your production is halted !!! In any country in Europe you can call 24 hour service, here everything is closed after 3 pm and don't try finding someone during the weekend.
That is why I don't see a very bright future for Croatia at this moment. It will remain a bit of nothing, some people doing well, but the majority living below poverty standards.
|
|
|
Post by mambo on Mar 6, 2010 21:05:12 GMT 1
Incredible !
I thought they had abandoned that practice several years ago. A few years ago bars/restaurants/shops etc could not put new items on the list before it was 'registered' and you could only register once per season !!!! That practice cost us a lot of customers over the years. People wanted to sell our product, but they did not have the license to sell it !!
But must admit that declaring how much of each ingredient is used is beyond anything I could have thought of. Maybe that is the reason why you will only find standard food in this country and no michelin star will ever be found.
Slowely I am starting to think that the system they thought of under Tito is too sick for words. You would think they would abandon it the moment they have the chance, but they didn't, instead they increased the 'Control' to ridiculous levels (under the pretense to stop black marketeering), while at the same time corrupt politicians and the club of 200 robbed the country clean.
And now the normal citizens are paying the price.
|
|
|
Post by crojoe on Mar 6, 2010 21:57:14 GMT 1
Paying for shelf space is a common practice in Europe these days, not just Croatia.
Since there is a major deduction on taxing first time home buyers, parents buying a second home in their own names for the future of their kids is silly. Might as well buy it in the name of the kid(s).
Personally, I think there should be a luxury tax in place. One major problem in Croatia is the threshold on the amount of money you can make before major taxation. It is super low in this country, a pure joke.
I agree that there is way to much control in this country for businesses. Having inspectors is one thing, and having checks is also a good thing, but the power they wield is way to much. I had a friend who had a clothing shop, and just because he wasn't up on every change made monthly to the price tag (you'll notice they don't just display the price in Croatia), they closed him down for a month, and he had to bug, beg for the inspectors to come by again to check that he had everything in place before he could resume business.
I think this is the most stupid thing they do in Croatia on all products, and that is they make you include everything about the product, especially the name and address of the company you purchased the item from. I don't know about other importers, but after all the work of finding a product, arranging price and importing it, your competition can just pick you item up and find out where you got it from. I especially think this is bad for smaller shops, as the bigger guys can just come along and wipe you out. Sure, state what’s in the product or what it's made off, and what country it’s from, but to go so far to state name of company and the address is stupid.
|
|
|
Post by dugodude on Mar 7, 2010 10:24:37 GMT 1
Solitum; "The problems is that you have a huge part of the people getting their paid by the public or from banks, insurance companies etc. all from industries which does bring 1 Kuna into Croatia, in most cases these people even get above average salaries, pensions etc. Q Are you saying that banks, insurance companies, etc bring no added value to the economy? I might be with you if you said that in Croatia they bring value at too high a cost, but that is a totally different argument. "If you would increase taxes and contribution on salaries e.g. lager then 5.000 kuna, you will hit exactly this group of people. Which will not hurt Croatian companies*, as these people are not spending their marginal income on stuff produced in Croatia, if that was the case, I would 100% agree to you statement above, but they don't, they use their marginal income to buy cars, Mobile phone, Television etc. all stuff which Croatia import from other countries." Q HOW do you know that? Granted, I would agree well-paid people are likely to spend a larger proportion of their discretional income on non-domestic items, but then if your domestic businesses are not producing much worth buying............. "So if Croatia increased taxes for this group of people, and spend this on removing contribution and taxes in export oriented production companies, I am sure it will have a positive impact on the economy." Except you might drive 'this group of people' out of business, one way or another - and both banks and insurance companies i suspect would just raise their fees/interest rate differentials, etc. "If that was the case would occur I would be able to employ up to 15 new people this year. Under the existing conditions, it is not even worth trying. Comment; I accept that you are on the ground, and know this better than me. "*Before anybody, get exited, yes I know a few trade companies will suffer, but you can not live from importing and selling." Lots of companies in many economies do exactly that. Of course, you can't have too many, or you will go bust, eventually, .........indeed, something like Croatia............ DD
|
|
|
Post by dugodude on Mar 7, 2010 10:34:50 GMT 1
I agree that there is way to much control in this country for businesses. Having inspectors is one thing, and having checks is also a good thing, but the power they wield is way to much. I had a friend who had a clothing shop, and just because he wasn't up on every change made monthly to the price tag (you'll notice they don't just display the price in Croatia), they closed him down for a month, and he had to bug, beg for the inspectors to come by again to check that he had everything in place before he could resume business. What one might call 'civilised' countries - which co-incidentally 'happen' to be better off - are characterised by administrators, that is people who are there to administer and inspect, and they do this, but within reason and with an eye to keeping the whole thing going. In most former communist (and 'developing') countries, administrators never existed - they started out life as bureaucrats, there to make as much of the job, whether through taking bribes of various forms, making life hell for the people they are supposed to serve or just being lazy and not doing their jobs.......making people wait and come back time and time again for another bit of paper, another stamp, another certificate. And bureaucratic lawmakers just invent laws which add to all this nonsense, which saps the lifeblood out of an economy. DD
|
|
|
Post by dugodude on Mar 7, 2010 10:59:36 GMT 1
Errr.... what exactly would devaluation of Kuna accomplish? Prices would rise, foreign debt would rise sharply, only minuscule export oriented companies (all three of them ) would feel a slight bit relieved, which would soon get compensated by the crashing strength of economy around them falling down the drain. Devaluation of Kuna is probably the worst thing that can happen to Croatia right now. OTOH, it would topple Jadranka's government, so it can't be completely bad ;D . . I agree that any devaluation of the kuna would cause problems now - but that is because it is being artificially kept high against the euro for too long. That is exactly my point in the water and dam analogy. If you peg your currency to another (say in this case, the euro), or join another currency union, then you need to keep your national productivity in line with the economy of the pegged currency. If not (assuming you lag) then you start to become expensive relative to (in this case) euroland. And the longer you stick to this artificial arrangement, the bigger the problem when it finally hits. This is precisely the problem with the euro applied to historically low productivity countries like Greece and Portugal. Put it this way; In 1960 let's say a Portuguese orange farmer needed to work one day to buy the same amount of goods as a Telefunken worker in Munich. What about 1970? I don't think you need to have a PhD in economics to realise the Telefunken worker is now making (say) super-value colour TV sets, while in Portugal, even though the orange farmer has improved his irrigation system, he now has to work 1.5 days to match the spending power of the German in Munich. And by 1980? Hans in Munich is now called an IT worker, and to keep up with him, despite better roads to Lisbon to market his oranges faster and cheaper, he has to work 2 days to get the same goods as Hans. And so it goes on. What is the answer? While Portugal had escudos, it devalued. Devaluation is a wage cut by the back door, and allows Pedro to keep on selling, but for a bit less return when exporting. But now Portugal is tied in to Germany via the euro, it can't do that - so Pedro in the Douro finds one of two things; a) he can't sell his oranges in euroland because they are too expensive, and he goes out of business (at least selling oranges) or b) he learns from the French, takes to the highways, burns a few trucks for a few days, and gets Brussels to give him subsidies to grow his oranges. Pedro is happy with the latter result - except that for every EUR 100 paid into Brussels (by EU taxpayers, mostly in the northern EU) only EUR 50 actually gets to Pedro - the rest goes in bank charges and pay for the administrators who dole out the subsidies. so the end result of b) is that the EU becomes an expensive state to administer, and the USA, or Japan, or China etc, become relatively more competitive. Of course, this is a simplified model - but unless Croatia pulls its fingers out, ...........the only thing that will save it is the relatively inefficiency of the EU - but that is only relative to the EU - the Chinese will eat up the EU in 20 years at this rate, and not even gulp on Croatia as they do so. DD
|
|
|
Post by mambo on Mar 7, 2010 13:28:44 GMT 1
A devaluation of the Kuna will, in my opinion, wreak only more havoc and should be avoided. In a country where the import is higher than the export, where there is no real industry aimed at exporting, a devaluation will only increase cost even more, sending the whole country into poverty. Remember that all imports will become more expensive and since Croatia is not producing a lot of products it means that normal households will end up even more in the negative.
A devaluation will have the same effect as Croatia changing to the Euro, something which should be avoided at all cost. The only way a devaluation would make sense is when it is coupled to a program which makes foreign investment (read: set up of companies) possible. And since this is not present a devaluation should not be considered.
|
|
|
Post by solitum on Mar 7, 2010 20:15:16 GMT 1
Solitum; "The problems is that you have a huge part of the people getting their paid by the public or from banks, insurance companies etc. all from industries which does bring 1 Kuna into Croatia, in most cases these people even get above average salaries, pensions etc. Q Are you saying that banks, insurance companies, etc bring no added value to the economy? yes, i am, this is service industries, they are their to service the business and the people, they do not produce goods, which can be exported. i have lived here almost 6 years, i have two ears, two eays and i use them. Which group? the ones who get fat saleries for doing nothing productive? That is exactly reason why you need to shift focus on production and export - otherwise Greece here we come
|
|
|
Post by solitum on Mar 7, 2010 21:00:37 GMT 1
@ Mambo
1. I know how the supermarkets operate, I have also done business with them, but I although still think lowing PDV to 7% on food like in Germany would have a positive impact, especially for the people with low incomes.
2. I 100% agree the restaurant themselves can do lots to improve their situation, I although still think it is good Idea to try with full deduction of restaurant bills, I see no reason why not to try it.
3. Increasing land tax on second will drive price on real-estate down to level where it has to be – 1.000 Euro m2, this will help lots of young people and businesses.
4. in government companies, bank and insurance companies, lots of people have more then 8.000 gross wage, so it will have an impact
5. Do you referrer to the non tax zone, where companies can get freed from company taxes up to 10 years? If so, this is more or less worthless, problem is not the company taxes, problem is the gross cost of labour. (do to high income tax and contribution)
I have a daughter going to school here, and I have to disagree on your view on the school system, to experience the teacher are very motivated, what could be said, is that the school system is to much oriented to learning by memory, not by understanding, but I think that is not only a problem in Croatia, when I comes to public schools.
|
|
|
Post by crojoe on Mar 7, 2010 21:22:03 GMT 1
The main reason behind the economical problem in Croatia is simply down to miss-laid money. With PDV at 22%, and now 23%, the 1 euro per day tax per person on coastal tourism in summer, highway tolls and the host of other taxes a normal business faces each month, money shouldn't be a major problem. Plus the cost of most everyday items (except beer) are at about 20% to 30% more expensive in this country. Personally, I think they should exclude meal tax write offs to companies, that way they might spend more time in the office then wining and dining from lunch time till night fall.
|
|
|
Post by mambo on Mar 8, 2010 1:31:19 GMT 1
Tax revenue has certainly gone down, but I wonder whether it has gone down because of tax evasion or because of a lower consumption / production etc.
|
|
|
Post by justapixel on Mar 8, 2010 10:46:29 GMT 1
I agree that any devaluation of the kuna would cause problems now - but that is because it is being artificially kept high against the euro for too long. That is exactly my point in the water and dam analogy. If you peg your currency to another (say in this case, the euro), or join another currency union, then you need to keep your national productivity in line with the economy of the pegged currency. If not (assuming you lag) then you start to become expensive relative to (in this case) euroland. And the longer you stick to this artificial arrangement, the bigger the problem when it finally hits. Kuna was always perceived as being artificially held too high, but now that I think about it, artificiality of the phenomenon comes into question. There is no way you can "artificially" pin a free floating currency to another for a long period (which in case of Croatia is 15 years or so). It was always the primary policy of HNB to keep Kuna "stable" and pinned and they kept Kuna value on tight leash by emissions and buying of their foreign currency reserves. Somehow they managed to do it without ever emptying the treasury, and even now, at the top of the crisis, we still have substantial reserves. The point is, that the ratio of Kuna to other currency doesn't matter at all if you are concerned only with marginal values, such as salaries and prices, because real prices in Croatia were always in DEM, USD or EUR. Kuna was pinned because everybody knew devaluation of Kuna would only mean rapid and sudden inflation. What Croatia really needed was reduction of costs - salaries, pensions and of course, taxes, but that was a very unpopular move that no government ever meant to pursue. In previous times, unrealistically high costs were balanced by borrowing more foreign money, which is not very unlike from what other countries were doing until they crashed into the recession. So now that the foreign money sources are running dry, we are back to the core of the problem - we have very few working people suffering under extremely high tax burden and feeding an army of inefficient bureaucrats, pensioners and unemployed. Because of high taxes, we manage to be at the same time too expensive (for the employer) and unmotivated (because after all the taxes we still don't get enough to support ourselves). This is precisely the problem with the euro applied to historically low productivity countries like Greece and Portugal. Put it this way; In 1960 let's say a Portuguese orange farmer needed to work one day to buy the same amount of goods as a Telefunken worker in Munich. What about 1970? I don't think you need to have a PhD in economics to realise the Telefunken worker is now making (say) super-value colour TV sets, while in Portugal, even though the orange farmer has improved his irrigation system, he now has to work 1.5 days to match the spending power of the German in Munich. And by 1980? Hans in Munich is now called an IT worker, and to keep up with him, despite better roads to Lisbon to market his oranges faster and cheaper, he has to work 2 days to get the same goods as Hans. And so it goes on. What is the answer? While Portugal had escudos, it devalued. Devaluation is a wage cut by the back door, and allows Pedro to keep on selling, but for a bit less return when exporting. But now Portugal is tied in to Germany via the euro, it can't do that - so Pedro in the Douro finds one of two things; a) he can't sell his oranges in euroland because they are too expensive, and he goes out of business (at least selling oranges) or b) he learns from the French, takes to the highways, burns a few trucks for a few days, and gets Brussels to give him subsidies to grow his oranges. Pedro is happy with the latter result - except that for every EUR 100 paid into Brussels (by EU taxpayers, mostly in the northern EU) only EUR 50 actually gets to Pedro - the rest goes in bank charges and pay for the administrators who dole out the subsidies. so the end result of b) is that the EU becomes an expensive state to administer, and the USA, or Japan, or China etc, become relatively more competitive. Of course, this is a simplified model - but unless Croatia pulls its fingers out, ...........the only thing that will save it is the relatively inefficiency of the EU - but that is only relative to the EU - the Chinese will eat up the EU in 20 years at this rate, and not even gulp on Croatia as they do so. You imply here that monetary engineering is the only way to devalue work. Politically it really manages to do it without strong social backlash, but in Croatia case, that would mean financial death. 10 years ago, it would have been possible, but right now, Croatia citizens are simply to deep in debts. The part of population hit the most would be the middle class. During last decade, they amassed an impressive debt, mostly buying their homes, and since their debts are in Euros and Francs, they would be driven below poverty level and basically forced to emigrate. Personally, I believe that in any society, middle class is the engine of progress and contributes the most - killing middle class would mean the destruction of economy and any chance of progress. .
|
|
|
Post by boris on Mar 9, 2010 20:32:31 GMT 1
Oliver Dragojevic decline to take the money from the mayor of Split, as many people protested. Now supermarket chain Lidli is partially financing his London koncert. Shame on you Lidl, support CRO poor instead!
|
|