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OECD Reviews of Regulatory Reform
Regulatory Policy
in Croatia
IMPLEMENTATION IS KEY
This work is published under the responsibility of the Secretary-General of the OECD. The
opinions expressed and arguments employed herein do not necessarily reflect the official
views of OECD member countries.
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Please cite this publication as:
OECD (2019), Regulatory Policy in Croatia: Implementation is Key, OECD Reviews of Regulatory Reform,
OECD Publishing, Paris, https://doi.org/10.1787/b1c44413-en.
ISBN 978-92-64-95430-4 (print)
ISBN 978-92-64-68206-1 (pdf)
ISBN 978-92-64-44552-9 (HTML)
ISBN 978-92-64-49776-4 (epub)
OECD Reviews of Regulatory Reform
ISSN 1563-4973 (print)
ISSN 1990-0481 (online)
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AND DEVELOPMENT
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ISBN 978-92-64-95430-4 – 2019
3
Foreword
Croatia has made great strides in strengthening its regulatory policy framework and implemented a broad
set of regulatory reforms to support more effective law-making and reduce administrative burdens for
businesses. The recently introduced RIA law and the law on access to information set out requirements to
conduct impact assessments and public consultations and accompanying guidance documents have been
provided to regulators to help them implement practices as set out in the OECD 2012 Recommendation
on Regulatory Policy and Governance.
The OECD Review of Regulatory Policy in Croatia assesses the development of these reforms, and takes
a detailed look at how the reforms are put into practice. It reviews the policies, institutions, and tools
employed by the Croatian government to design, implement and enforce regulations. This includes policies
on administrative simplification, ex ante and ex post evaluation of regulations, public consultation practices,
as well as regulatory enforcement and inspections. The review also contains a special chapter on the
taxation of small and medium-sized enterprises. The review then provides policy recommendations based
on best international practices and peer assessment to strengthen the government’s capacity to manage
regulatory policy.
The review finds that Croatia has successfully put in place some of the essential tools of better regulation.
For example, stakeholder engagement via the e-consultation platform e-Savjetovanja is common practice
and RIA starts relatively early in the process and looks at a wide variety of impacts. Challenges remain,
however, to ensure that the tools are used effectively and both primary and secondary legislation are
targeted. The review makes recommendations to address these particular challenges. For example,
Croatia would benefit from strengthened analytical capacities in line ministries, as well as renewed political
commitment to better regulation.
The review methodology draws on decades of experience in better regulation reflected in the OECD 2012
Recommendation on Regulatory Policy and Governance. The Recommendation identifies the measures
that governments can and should take to support better regulation. These measures are used as a baseline
for assessing regulatory management capacity in Croatia. The review also uses the 2014 OECD Best
Practice Principles for Regulatory Policy: Regulatory Enforcement and Inspections and the OECD
Enforcement and Inspections Toolkit, which address the design of effective compliance policies and
institutions and the process of reforming inspection regimes to achieve policy objectives.
The OECD Regulatory Policy Committee leads the programme on regulatory governance with the support
of the Regulatory Policy Division of the OECD Public Governance Directorate. Regulatory policy country
reviews are a key part of the Committee’s programme. The Directorate’s mission is to help government at
all levels design and implement strategic, evidence-based and innovative policies to strengthen public
governance; respond effectively to diverse and disruptive economic, social and environmental challenges
and deliver on government’s commitments to citizens. The goal of the programme is to support sustainable
economic and social development through sound government frameworks that enable evidenced-based
policy making.
REGULATORY POLICY IN CROATIA: IMPLEMENTATION IS KEY © OECD 2019
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This document was produced with the financial assistance of the European Union. The views expressed
herein can in no way be taken to reflect the official opinion of the European Union.
Acknowledgements
The review was prepared by a multidisciplinary team led by Daniel Trnka, Senior Policy Analyst, under the
guidance of Nick Malyshev, Head of the Regulatory Policy Division, and the leadership by Marcos Bonturi,
Director of the Public Governance Directorate. The following team members took primary responsibility for
different sections of the review: Daniel Trnka for Chapters 4 (stakeholder engagement and public
consultations) and 7 (regulatory compliance, enforcement and inspections); Eric Thomson for Chapters 5
(the development of new regulations), 6 (ex post evaluation of regulation) and 8 (multilevel governance:
sub-national level); Yola Thürer for Chapters 1 (macroeconomic and political context), 2 (context for better
regulation), 3 (institutional framework and capacities) and 9 (multi-level governance: EU level). Sarah
Perrett from the OECD Centre for Tax Policy prepared Chapter 10 (SME taxation in Croatia). The review
team would like to thank Bert Brys and Sarah Perrett for the great collaboration. Many thanks go to
delegates of the OECD Regulatory Policy Committee as well as to colleagues from the OECD Regulatory
Policy Division and the Investment Division for providing useful comments and support; to Claudia Paupe
and Anna-Sofia Kanjovski for lending administrative and organisational support; and to Jennifer Stein for
co-ordinating the editorial process. The financial support of the European Union’s Structural Reform
Support Service (SRSS) is gratefully acknowledged.
The team included peers from the members of the OECD Regulatory Policy Committee, who actively
participated in the fact-finding mission to Croatia and provided key inputs throughout the development of
the review: Nadia Marin from the Office for Regulatory Quality in Italy and Andrea García Vidal from the
Office for Co-ordination and Normative Quality in Spain. Külvi Noor from the Ministry of Justice in Estonia,
Morten Vestergaard Hansen from the Danish Business Authority, Martin Traynor from the UK Cabinet
Office and Daniel Kühnhenrich from the German Federal Statistical Office also participated in the
workshops in Croatia.
The review would not have been possible without the support of the Government of Croatia. The team
would like to thank in particular Filip Kočiš from the Ministry of Economy, Entrepreneurship and Crafts for
the unique assistance in collecting data and information, organising the team’s fact-finding mission and
workshops in Croatia and providing feedback throughout the development of the review.
REGULATORY POLICY IN CROATIA: IMPLEMENTATION IS KEY © OECD 2019
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Table of contents
Abbreviations and acronyms 9
Executive summary 10
Country profile: Croatia 13
1 Macroeconomic and political context 14
Political context: Croatia’s path from independence to EU membership 15
Government structure 15
Economic context 16
References 24
Notes 25
2 The context for Better Regulation in Croatia 26
Regulatory policy and core principles 27
History of Better Regulation in Croatia 30
Assessment and recommendations 35
References 37
Notes 38
3 Institutional framework and capacities for regulatory policy 39
Key institutions and regulatory policy oversight of the regulatory process in Croatia 40
Co-ordination of the Better Regulation policy across government 44
Resources, training and guidance 46
Assessment and recommendations 47
References 49
Note 49
4 Stakeholder engagement and public consultations 50
Regulatory framework for stakeholder engagement 53
Electronic consultations 54
Public consultations and RIA 54
Early stage consultations 55
Institutional set up for overseeing the quality of stakeholder engagement 56
Stakeholder engagement in reviewing regulations 57
Access to regulations 58
Assessment and recommendations 58
References 60
Notes 60
REGULATORY POLICY IN CROATIA: IMPLEMENTATION IS KEY © OECD 2019
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5 The development of new regulations in Croatia 61
RIA in OECD countries 62
The legislative process in Croatia 65
Trends in new regulation 66
Procedures for new regulation in Croatia 67
Oversight and inter-ministerial co-ordination 68
Legal quality 69
Ex ante analysis of regulations 69
Assessment and recommendations 75
RIA twinning projects in Croatia 76
References 78
Notes 79
6 Ex post evaluation of regulation in Croatia 80
Reviews of the stock of regulation and formalities 84
Administrative simplification initiatives 84
The use of ICTs to streamline processes in Croatia 85
Assessment and recommendations 86
References 87
Notes 87
Annex 6.A. Seven public administration digitalisation projects under way in Croatia 88
7 Regulatory compliance, enforcement and inspections 90
Compliance with regulations 91
Regulatory enforcement and inspections 91
Appeals 95
Assessment and recommendations 95
References 96
Notes 96
8 Multilevel Governance: The interface between the national and the sub-national
level 97
The importance of sub-national regulatory policy 98
The organisation of regulatory attributions in Croatia 99
Oversight of regulation at the sub-national level 101
Multilevel co-ordination 102
Challenges and opportunities for regulatory policy in Croatia’s municipalities, counties, and
cities 103
Assessment and recommendation 105
References 106
Notes 107
9 Multilevel governance: The interface between the national level and the European
Union 108
Croatia in the European Union 109
Assessment and recommendations 114
References 115
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10 SME Taxation in Croatia 116
Brief description of the SME sector in Croatia 117
Overview of the Croatian tax system 118
Overview of the arguments for and against special tax provisions for SMEs 123
Assessment and recommendations for the taxation of SMEs 128
References 143
Notes 144
Tables
Table 1.1. Main economic indicators 18
Table 6.1. Sum of administrative costs and reduction – Action Plan for Administrative Burden Reduction on
Economy 2018 85
Table 9.1. UK Transposition Guidance 112
Table 10.1. Key tax support measures for SMEs in Croatia 122
Table 10.2. Typology of special tax provisions for SMEs 123
Table 10.3. Lump-sum tax for small businesses 129
Table 10.4. Corporate tax incentives available to SMEs in Croatia 135
Table 10.5. Investment tax incentives: eligibility criteria and CIT rate reductions 135
Figures
Figure 1.1. Real GDP growth in selected CEE countries, annual percent change 17
Figure 1.2. GDP per capita, 2017 (EU-28=100) 17
Figure 1.3. 2013 OECD Product Market Indicators score for CEE countries 19
Figure 1.4. World Bank 2019 Ease of Doing Business scores 19
Figure 1.5. OECD FDI Regulatory Restrictiveness Index, 2017, by sectors 21
Figure 1.6. OECD FDI Regulatory Restrictiveness Index, 2017 21
Figure 1.7. Overview of World Governance Indicators scores for Croatia, 1996-2017 22
Figure 1.8. Government effectiveness in Croatia and EU 28 according to the World Bank World Governance
Indicators 23
Figure 1.9. Size of the shadow economy of 31 European countries in 2017: Adjusted MIMIC estimates 23
Figure 2.1. Adoption of a whole-of-government approach for regulatory quality in OECD countries 29
Figure 2.2. World Bank Ease of Doing Business Index for selected CEE-countries by Distance-to-Frontier
Metric, 2019 30
Figure 2.3. Reports on the performance of regulatory policy tools 35
Figure 3.1. Location of bodies responsible for quality control of regulatory management tools 41
Figure 4.1. Stakeholder engagement in developing primary laws, 2018 51
Figure 4.2. Stakeholder engagement in developing subordinate regulation, 2018 52
Figure 4.3. Croatia stakeholder engagement scores 2018 52
Figure 5.1. Regulatory Impact Assessment for developing primary laws, 2018 64
Figure 5.2. Regulatory Impact Assessment for developing subordinate regulations, 2018 64
Figure 5.3. Number of laws passed by the current Croatian Parliament, by regular and urgent procedure 66
Figure 6.1. Composite indicators: Ex post evaluation of primary laws, 2018 82
Figure 6.2. Composite indicators: Ex post evaluation of subordinate regulations, 2018 82
Figure 9.1. EU Member States’ requirements to conduct stakeholder engagement and RIA on EU-made laws 111
Figure 9.2. Requirements to assess gold plating and national additional implementation measures 113
Figure 10.1. Share of total employment and value added by company size in 2016: Croatia and EU average 117
Figure 10.2. Breakdown of the SME population in non-financial sectors in Croatia 118
Figure 10.3. Tax revenues as a share of GDP in 2006 and 2016 in EU countries 118
Figure 10.4. Composition of total tax revenues in 2016 – Croatia and EU-28 average 119
Figure 10.5. Tax wedge for single workers earning the average wage across EU countries in 2017 120
Figure 10.6. Tax wedges for single workers earning 50% of the average wage across EU countries in 2008
and 2016 121
Figure 10.7. Small businesses’ average tax rate on turnover under the lump-sum tax 130
REGULATORY POLICY IN CROATIA: IMPLEMENTATION IS KEY © OECD 2019
