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Time to stop avoiding the tax avoidance issue in Croatia? A proposal based on recent developments in the European Union

Author

Listed:
  • Stjepan Gadzo

    (University of Rijeka, Faculty of Law, Rijeka, Croatia)

  • Irena Klemencic

    (Institute of Public Finance, Zagreb, Croatia)

Abstract

The paper takes a tax policy perspective in analysing the approach to tax avoidance in Croatia and expounding its existing shortcomings. It is argued that Croatia is yet to develop a coherent legislative framework suitable for curbing tax avoidance in an equitable, efficient and simple way. One instrument that has hitherto been ignored is the general anti-avoidance rule (GAAR), a keystone of anti-avoidance policies in other countries. The authors propose the introduction of a specific GAAR, based on recent developments in the European Union (EU), in Croatian tax legislation. This proposal is supported by multiple tax policy arguments. Special emphasis is placed on the requirements of legal certainty, a traditional weak spot of the Croatian tax system. The proposal is put in the context of the persistent quest for a sustainable public finance system in times of crisis.

Suggested Citation

  • Stjepan Gadzo & Irena Klemencic, 2014. "Time to stop avoiding the tax avoidance issue in Croatia? A proposal based on recent developments in the European Union," Financial Theory and Practice, Institute of Public Finance, vol. 38(3), pages 277-302.
    • Handle: RePEc:ipf:finteo:v:38:y:2014:i:3:p:277-302
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    References listed on IDEAS

    as
    1. Krister Andersson & Eva Eberhartinger & Lars Oxelheim (ed.), 2007. "National Tax Policy in Europe," Springer Books, Springer, number 978-3-540-70711-0, February.
    2. David A. Weisbach, 2002. "An Economic Analysis of Anti-Tax-Avoidance Doctrines," American Law and Economics Review, American Law and Economics Association, vol. 4(1), pages 88-115, January.
    3. Slemrod, Joel & Yitzhaki, Shlomo, 2002. "Tax avoidance, evasion, and administration," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 22, pages 1423-1470, Elsevier.
    4. James Andreoni & Brian Erard & Jonathan Feinstein, 1998. "Tax Compliance," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 818-860, June.
    5. Mattias Dahlberg, 2007. "The European Court of Justice and Direct Taxation: A Recent Change of Direction?," Springer Books, in: Krister Andersson & Eva Eberhartinger & Lars Oxelheim (ed.), National Tax Policy in Europe, chapter 0, pages 165-190, Springer.
    6. Benno Torgler & Christoph A. Schaltegger, 2005. "Tax Morale and Fiscal Policy," CREMA Working Paper Series 2005-30, Center for Research in Economics, Management and the Arts (CREMA).
    7. Rebecca Prebble, 2005. "Does Croatia need a general anti-avoidance rule? Recommended changes to Croatia's current legislative framework," Financial Theory and Practice, Institute of Public Finance, vol. 29(3), pages 211-227.
    8. James Alm, 2012. "Measuring, explaining, and controlling tax evasion: lessons from theory, experiments, and field studies," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(1), pages 54-77, February.
    9. Justin Tyson, 2014. "Reforming Tax Expenditures in Italy: What, Why, and How?," IMF Working Papers 2014/007, International Monetary Fund.
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    Cited by:

    1. Marko Crnogorac & Santiago Lago-Pe?as, 2019. "Tax evasion in the countries of Former Yugoslavia," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 37(2), pages 823-851.

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    More about this item

    Keywords

    tax avoidance; tax abuse; general anti-avoidance rule; GAAR; EU tax law; wholly artificial arrangements; tax policy;
    All these keywords.

    JEL classification:

    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

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