Crypto News: Brussels Edition: Taxing a socialist legacy

Welcome to the weekend issue of Brussels Edition, Bloomberg's daily briefing on what matters most in the heart of the European Union. Join us on Saturdays for deeper dives from our bureaus across Europe.

ZAGREB — More than four decades ago, Dubravka Mrvelj's parents bought a small one-bedroom summer home with a terrace near the beach on the Istrian peninsula along the Adriatic Sea.

Back then, when the country was part of the Yugoslav empire, a second home was one of the few luxuries available — particularly when there was no competition from foreign tourists.

Now, as Croatia has evolved into one of Europe's leading tourist destinations, almost a quarter of the families in the country of 3.9 million have a second home or even a third, often rented to tourists during the season.

A legacy of the country's socialist past is that real estate is virtually untaxed. That may soon change.

The Istrian peninsula is a popular spot for Croatian and foreign tourists. Photographer: Tuul & Bruno Morandi/The Image Bank RF

This week, Prime Minister Andrej Plenkovic proposed a new levy on second homes, saying he needs to tackle a housing shortage and revive real-estate sales, as well as shift the tax burden from labor to property.

Under his plan, first residences and long-term rentals would be exempted from the tax, which still needs to be approved by lawmakers.

For Mrvelj, whose family of four often vacations or spends weekends at their Istrian getaway, the government's plan seems punitive.

"My parents bought our weekend house because they couldn't invest in anything else, like stocks and bonds," said Mrvelj, 51, an economist whose main home is an apartment in Zagreb. "Many people put all their savings into second homes, and taxing it doesn't seem fair."

Between second homes, and those that are used commercially or vacant, the tax could apply to 800,000 properties, or about 40% of the country's housing stock.

That means Plenkovic's plan is likely to face intense opposition. Previous governments have failed in their efforts to impose one.

If he does succeed, it would build a more stable tax base — and also could raise prices in tourism, which contributes about 20% to the gross domestic product as the country's biggest industry.

Vedrana Pribicevic, a lecturer at the Zagreb School of Economics and Management, said that the luxury tourism industry could end up transferring the burden onto tourists.

She added that it ultimately "may force a switch to long-term renting or even sales, creating a scarcity on the tourism rental market."

— Jasmina Kuzmanovic, Croatia reporter

France's Role as One of Europe's Safest Bond Markets Is at Risk

France's status as one of the safest bond markets in Europe may be coming to an end as a fragile minority government struggles to address a debt problem years in the making. For the first time since at least the global financial crisis, France's benchmark bond yield is higher than that of Spain and Portugal. The rate is also the closest it's been in over a decade to that of Italy and Greece.

Kyiv's Allies Are Strapped for Cash With Arms Supplies at Risk

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How Europe's Battery Hope Has Become a Symbol of the EV Bust

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Europe's Battered Listed Landlords Are Preparing for a Rebound

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Vail Targets More Alpine Ski Resort Purchases in Climate Hedge

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The world's largest ski resort operator is looking to snap up more Alpine stations in Europe, in an expansion partly driven by the need to hedge against climate change. Vail Resorts has acquired two Swiss resorts — Andermatt Sedrun and Crans-Montana — and now the CEO wants to replicate the company's North America strategy in western Europe's highest mountains

Sunday: Austrian federal elections
Monday: ECB President Christine Lagarde speaks to EU Parliament committee
Tuesday: Former Dutch Prime Minister becomes new NATO secretary general, succeeding Jens Stoltenberg; Martin Schlegel takes over as president of the Swiss National Bank
Wednesday: Polish central bank rates decision; Ukrainian government holds conference on weapons' production

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