Academic journal article UTMS Journal of Economics

Harmonization of Tax Policies: Reviewing Macedonia and Croatia

Academic journal article UTMS Journal of Economics

Harmonization of Tax Policies: Reviewing Macedonia and Croatia

Article excerpt


Whether a country can be a part of the Euro zone and adopt the euro as the national currency depends on these rules, which are also called criteria for convergence of national economies. They are as follows:

· Price stability (level of inflation), the inflation rate must not exceed 1.5% of the average of the three countries with the lowest inflation rates, thus requiring high stability of the domestic currency;

· The budget deficit should not exceed 3% of GDP in the previous year;

· Government debt should not exceed 60% of GDP in the previous year;

· Long-term interest rate should not be more than 2% above the average of the rates of the three countries with the lowest inflation rate.

To maintain and facilitate economic and monetary union in terms of conducting the fiscal policy, Stability and Growth Pact has been applied since 1999. The purpose of the Pact is maintaining a budgetary discipline in the Member States after the introduction of the euro. National governments have discretion in the conduct of the tax system and tax policy, which are important markers of national sovereignty (Chang 2013).

The harmonization involves a process of removal of fiscal barriers and process of approaching the tax systems to guarantee a smooth functioning of the common market. The first step in the harmonization of indirect taxes was the introduction of value added tax. Later, there were the two directives in the tax system of the Council of the European Community, which provide uniform rules for all countrie (Eggert and Genser 2001).

Although all members of the European Union implemented VAT in their tax system, yet there are significant differences among them in the type and amount of tax rates, tax exemptions, participation of value added tax in total tax revenues of some countries, tax burdens, and so on.

The reforms in the tax system in terms of direct and indirect taxes are an adjustment of directives and other legal acts in the European Union (Remeur 2015).


Taxation is a complex economic, financial and social problem, which refers to the various types of taxes that are regulated by special laws, legal rules and regulations (Sorensen 2004). Tax reforms that occurred in developed countries were the result of the presence of tax evasion in large-scale application of high marginal rates the implementation of high marginal tax rates, the increase of public expenditure, budget deficit and public debt, globalization and mobility of capital, avoiding fiscal distortions and more (Zodrow 2003).

The national programme for the adoption of the EU rule in the field of taxation (Cnossen 2003) consists of several parts: value added tax, excises, income tax, personal income tax, administrative cooperation and mutual assistance, operational capacity and computerization.

1.1. Value added tax

Taxing the consumption of goods and services in the country is regulated by the Law on Value Added Tax (VAT), in which the requirements of the EU legislation on VAT are mostly transposed on:

· Sixth (systemic) Council Directive 31977L0388 on harmonization of legislation of the Member countries relating to turnover taxes - Common system of VAT: uniform basis of assessment,

· Thirteenth Council Directive 31986L0560, the harmonization of legislation of Member countries relating to turnover taxes - Arrangements for the refund of VAT taxpayers that are not established on the territory of the Community.

The result is alignment in the tax treatment of investment goods where by the application of the mechanism of withholding of tax, there is no tax burden in the enterprise domain, but a burden of only the final consumption, which is the purpose of VAT (Terra 2011).

In amending the Law on VAT, the provisions of Directive 32006L0112 (with all its amendments) are regarded which replaces the sixth (systemic) Council Directive 31977L0388. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed


An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.