Hospitality businesses seek long-term solutions amid uncertainty

The start of the tourism season has government officials feeling hopeful but a year and a half into the pandemic, many in the hospitality industry just don't see how they will survive.

Representatives of the National Association of Hospitality Businesses, its partners, and the Tourism Union met in Zagreb on Tuesday to discuss the situation in their sector and to draft proposals of their own to present to the government.

Hospitality business owners fear that another lockdown or more restrictions will force them into bankruptcy. They say they appreciate the financial relief the government has provided but looking to the future, the fall and next year, they want to see what can be done to keep their businesses afloat if the current situation persists. They say one of the factors suffocating their business is Croatia's high VAT rate and they would like to see it slashed to 13% on coffee, beer, wine, and non-alcoholic beverages. If that is not possible, they offer an alternative, a change in the way gross salaries are calculated into the net basis for paying VAT. The head of the National Association of Hospitality Businesses, Jelena Tabak, says this would leave more for salaries and contributions into health care and pensions.

The industry is also seeing a labor exodus, says Dražen Biljan, who represents bars and cafes within the organization.

"People are fleeing our industry. Why? Wages are too low, we have no idea how long we'll be allowed to stay open, uncertainty, and (people have) loans," he said.

Many bars without outdoor seating remain closed while restaurants are allowed to operate indoors. This is causing major problems for many establishments in continental Croatia with no outdoor space. While underscoring that they support the government's measures, industry representatives said they would like to meet with the Prime Minister to discuss these issues.

Finance Minister Zdravko Marić, who is in Brussels today, said he was willing to talk to them.

"We are going to sit down and talk but we'll see what happens after that. We've discussed tax policy many times over the past five years and not just the VAT rate.”

Marić said the government had shown that it was working to ease the tax burden and had done that for businesses and citizens in a significant way.

“I think we did it wisely, never bringing into question the sustainability of our public finances," he said.

By trimming taxes and limiting spending, the government was able to lower the national debt for four years running, Marić added. This, he said, made it possible for Croatia to respond to the crisis brought on by the pandemic.