Analysis of Personal Income Taxation Determinants in Croatia in Long Run: Evidence from Cointegration Analysis

Irena  Palić; Ksenija  Dumičić; Barbara Grofelnik

Irena Palić
Ksenija Dumičić
Barbara Grofelnik

Keywords: personal income taxation determinants, economic conditions, wages, number of taxpayers, johansen cointegration approach, Croatia

Abstract

Personal income taxation remains an ongoing issue in Croatia. It is used as an important instrument of income redistribution. Moreover, it directly affects pur- chasing power of the working population. Numerous changes have been made in this type of taxation since the establishment of Croatian tax system. The aim of this paper is to analyse possible determinants of personal income taxation in Croatia. After offering brief insight into public finance theory regarding personal income taxation, the structure of personal income taxation in Croatia is explained. The empirical analysis of the determinants of personal income taxation in Croatia is conducted using cointegration analysis. Economic conditions, average monthly wage, and number of taxpayers are used as determinants of personal income tax used in this research. The cointegration analysis is conducted using monthly data from January 2008 to February 2016. The results of the research show a statistical- ly significant negative impact of economic conditions and statistically significant positive impact of average monthly wage and number of taxpayers on personal income taxation in long run, what is in line with economic and public finance theory.

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Author Biographies

Irena Palić

University of Zagreb, Faculty of Economics & Business, Croatia
E-mail: ipalic@efzg.hr

Irena Palić is currently employed as assistant professor at the Department of Statistics, Faculty of Economics and Business, University of Zagreb. Since 2008, she has taught the following courses: statistics, sampling methods, business statistics, statistical methods in professional and scientific work, statistical methods of research in tourism. Her main research fields are application of statistics and econometrics in business, finance and economics and dynamic stochastic general equilibrium models. She has published 31 scientific papers and participated in 17 scientific conferences.

Ksenija Dumičić

University of Zagreb, Faculty of Economics & Business, Croatia
E-mail: kdumicic@efzg.hr

Ksenija Dumičić, a full tenured professor in the Department of Statistics, Faculty of Economics and Business, University of Zagreb, is focused in survey sampling, statistical quality control, business statistics, and forecasting. She specialized at the Institute for Social Research at the University of Michigan. She is a leader of postgraduate statistical studies and UN, EU, and Croatian Science Foundation projects. She is an elected member of the ISI and president of the Croatian Statistical Association. She has published 130 papers and is the co-author of several books.

Barbara Grofelnik

Graduate student at Faculty of Economics & Business, University of Zagreb, Croatia
E-mail: barbara.grofelnik93@gmail.com

Barbara Grofelnik is a student in graduate study at the Faculty of Economics and Business, University of Zagreb, majoring in accounting and auditory. She worked as student in auditing and in controlling departments in various companies. She has been working as the student assistant at the Department of Statistics, Faculty of Economics and Business, University of Zagreb since 2012. Her main field of interest is application of statistical and econometric methods in finance and accounting.

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