Review article
Municipal Insolvency in Croatia: Current State and Prospects in the Light of The Europeanization of Multilevel Governance
Dana Dobrić
; Faculty of Law University of Rijeka, Rijeka, Croatia
Stjepan Gadžo
orcid.org/0000-0002-1905-5330
; Faculty of Law University of Rijeka, Rijeka, Croatia
Dejan Bodul
; Faculty of Law University of Rijeka, Rijeka, Croatia
Abstract
In the complex conditions of a market-oriented economy the Croatian public sector inevitably faces challenges that cannot be analysed only within traditional ambits of a single legal discipline. Accordingly, authors of this paper approach the local government issues by acknowledging the complementarity between insolvency law and tax law – traditionally recognized as distinct legal disciplines – as well as administrative science as a socio-empirical discipline. Their interrelationship is exposed by the depth of the crisis encompassing all of the three scientific areas. First, repeated warnings, issued from academic circles, on the necessity of an administrative-territorial reform in Croatia in the direction of consolidation of local government have been largely ignored by the political elites. Thus, the attention has turned to identifying other instruments apt for strengthening the economic and financial capacity of subnational units. Namely, there are rising possibilities of application for the EU funding, but also for strategic development planning backed up by the new institutional patterns (local development agencies, local action groups, business incubators etc.) and for functional adjustments following European trends (e.g. public-private partnerships, outsourcing, contracting-out). Second, most recent legislative interventions in Croatian tax system – in particular in the individual income tax area – necessarily call for a re-examination of the local government fiscal balances. While the realization of the overall objectives of these interventions (e.g. incentivizing household consumption and economic growth) is uncertain, it will certainly lead to substantial revenue loss for subnational units, thus increasing their insolvency risks. At the same time, anticipated assistance from the central government level may be withheld, due to the more stringent budgetary constraints in the post-EU accession period. Third, in the insolvency law area the Croatian legislator has not yet provided a clear answer on what the primary aim of insolvency proceedings is and whom it benefits. These questions are important having in mind the built-in conflicting interests of different stakeholders (e.g. shareholders, creditors, employees, general public). At the moment, Croatian legal framework does not recognize the possibility for conducting municipal insolvency proceedings nor any other ex post approaches to this issue. Accordingly, the authors analyse whether such approach could be justified in the future. The methodological approach was determined by the complexity of the paper objective. Accordingly, the authors rely on scientific literature, pertinent statutory provisions and judicial practice in Croatia and in other countries (Hungary and USA) that have opted for a different approach to the subnational insolvency issue.
Keywords
local government; local public finance; Croatian Income Tax Act; subnational bankruptcy; local government consolidation
Hrčak ID:
164178
URI
Publication date:
25.6.2016.
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