Second wave of fiscal reforms in Serbia
The President of the Government of the Republic of Serbia, together with the Minister of Finance and Economy, Mr. Bozidar Djelic, presented today, in the congress center „Sava“, before some three hundred biggest „taxpayers“, the second wave of fiscal reforms ( >> )in Serbia. Along with their colleagues from other ministries, minister Djelic emphasized that the suggested fiscal reform is aimed to raise the standard of the population, as well as to stimulate employment and investment.
Serbia is entering the new phase of fiscal reform, represented by the reduction of tax rates, the introduction of a series of tax benefits and the suspension of tax duties for certain products as well as for certain social categories of the population. Therefore, sales tax are suspended for the cooking oil and grease, sugar, computer equipment and housing renting. The income tax rate for citizens is brought down to 14%, the same rate in effect for the tax on corporate profit. The tax on the severance pay for workers older than 50 is also suspended. Companies investing or engaging new manpower can obtain a 10 years period of tax exemption.
For the pensions payment, we used to allocate approximately 40 percent of the funds from the budget collected through tax enforcement, while now, considering the acceleration of the privatization, funds will be provided from the income of companies selling.
– The State public income will, therefore, be reduced by some 10 billion dinars (in 2003.), and this deficit has to be covered by the reduction of public expenditures, especially those of the government administration. The ratio of the public expenditures is actually at 45 percent of the National Product, and we plan a reduction by one or two percent yearly, in the coming years, explained the Finance minister, Mr. Bozidar Djelic.
Emphasizing that the investors should be attracted by the profitability of investing in the economy and the production processes, and not only financial transactions, Serbian Prime Minister, expressed his conviction that – with a stimulating fiscal policy and a thorough reform o the whole economic environment, Serbia could reach the economic concurrency of the countries in the region by the month of may of the coming year, and at least in two years of time join the 30 most successful on the world list.
Therefore, besides great fiscal benefits, according o the finance minister, this fiscal reform provides with an extremely clear regulations towards the „recuperation“; of those from the gray zone. A part of this legal regulation stipulates that, at last by the end of June of the next year, special tax return notes will have to be submitted by all those citizens whose property is estimated above 20 million dinars (3.3 million Euros); after tat period of time, starting from January 2004, fiscal police begins to operate. Follows the creation, within the Republic Tax Administration, of a unified inspection body, which will enclose the actual financial police. In contrast to the present legal framework, the new one provides for a totally synchronized activity of all Republic Tax Administration branch offices.
An additional „cutting off“ of the gray economy will be assured by the laws on tobacco and games of chance, already forwarded to the parliamentary debate. It is also suggested to reduce by 50% the excise tax rate on motor oil and lubricants, in order to make smuggling in this domain senseless.
Finally, youth working cooperatives fell under the magnifying lenses of the tax evasion prevention measures. The right to be employed and remunerated will be granted only to those under the age of 26, and forbidden for anyone older (there were situations where people of 50 years of age were paid through these cooperatives).
The salaries tax rate remains unchanged, at 14 percent, but according to the new rules, all the income taxes for citizens will be at this same rate. Namely, until now, income from author fees, copyright royalties, renting and agriculture, were taxed at a 20 percent rate. According to the new regulations, all types income tax for citizens is brought to a unique 14 percent rate, except those realizing a yearly income superior to 600.000 dinars, who will have to pay additional 10 percent of the exceeding difference.
BOATS AND WEAPONS
Fishermen and hunters will also be exempted of tax duties. Owning a boat of maximum 7,35 kw power or a raft-house, will be tax exempted. Concerning the weapons, trophy weapons (max. two pieces)
and gifts from the Army or the Police will be also tax exempted.
The essential part of the fiscal benefits is the corporate profit tax exemption, extensible to a 10 years period, for companies investing 600 million dinars and employing 100 new workers. Small companies were not neglected – therefore, a five years tax exemption period is provided for all those companies investing 600.000 dinars and employing 5 new workers.
Regarding the income tax rate itself, it is also reduced, and brought down from 20 to a 14 percent rate, and represents, according to the finance minister Djelic, one of the lowest in the region and even beyond.