Taxation - Introduction and Developments

Despite continued jitters among foreign investors because of the political and military situation in this part of the world, the Croatian economy has seen substantial improvements since 1991. An austerity plan introduced in 1993 reduced inflation from 2,000 per cent to zero in 1994 and the National Bank's foreign currency reserves have grown from zero to US$ 2.9 billion (June 1995). The new currency, the kuna (1 HRK = US$ 0.18), introduced as part of the austerity program, has been stable against major foreign currencies and has appreciated against some, including the German Mark.

Interest rates and taxes continue to be high largely due to the political situation and the cost of defence and of supporting refugees. The IMF, of which Croatia is a full member, has recently forecast 3% inflation and 5% growth in GDP for 1995.