Serbian Government adopted the Proposal of Budget for 2004.

On the occasion of today’s session the Serbian Government adopted the Proposal of Budget for the year 2004, which should be adopted by the National Parliament not later than December 15th. In the meantime, the term for the entry in effect of the Law on the Value Added Tax (VAT) has been delayed for six months. (see the presentation)

Minister Djelic estimated that the adopted Budget Proposal represents a compromise between a development and social budget orientation, providing for both a regular payment of pensions and social care obligations, but also the financing of the reform of domestic companies.

According to the predictions, the most part of the budgetary revenues should be provided for by the taxation of the consumption, through the sales tax, and later on, through the value added tax (VAT). The major part of the budgetary funds are intended for the social security funds purposes.

According to Minister Djelic’s explanations, funds collected from privatization, donations, World Bank credits and internal debt contracting should be used for the covering of the budgetary deficit. According to his terms, Serbia has realized one of the most rapid economic growth rates in Europe – despite of the a very difficult year as the current one, and that this growth rate should remain at 4% during the following one.

The Minister also emphasized the realization of a considerable growth of the GDP per capita during 2003, which now amounts 2.569 US Dollars, and added that a further GDP growth is to be expected. The reduction of the inflation rate was also significant, so that it will amount 9% for this year.

In the meantime, a packet of regulations in the matter of Serbian public finances was also adopted on the session of the Government. The Minister suggested to the Serbian Parliament that despite of the existing problems, a thorough fiscal reform should be carried out, in order to complete the Republic fiscal system, which means a fiscal unburdening of the Serbian citizens.

Mr. Djelic said that considering the fact that these measures packet could not have been adopted by the second half of November, the Serbian Government has decided to delay for six months the term for the entry in effect of the value added tax, from January 1st 2004. to July 1st 2004.

The Minister estimated that the introduction of this tax and the suspension of the Salary Fun tax will result in an unburdening of the economy, and expressed his hope that there will be enough consensus in the Parliament concerning the value added tax, at the moment of it’s adoption. He reminded again that Serbia and Bosnia and Herzegovina are the only two European countries that still have not introduced the VAT.

Mr. Djelic emphasized that all the adopted modifications are harmonized with the legal regulations existing in European Union countries, which is of considerable importance for the future integration of Serbia into the European streams, and added that the planned modifications also refer to the excise taxes, by suspending the payment of the excise tax on motor oils and lubricants, kerosene, liquid petrol gas, lighting petroleum and ethanol, and the increase of the excise tax on gas and diesel fuel, and the introduction of a percentage excise on coffee.

Speaking of the income tax, Mr. Djelic said that concerning this domain, taxes on various income sources shall be unified, so that the income tax rate for any kind of income shall be 14%, instead of the actual 20%, as well as that the bases of tax and contribution calculation shall be harmonized, that the taxing of income from savings deposits shall be suspended, and that the declaration of the total annual income shall be mandatory for everyone, nonetheless the amount of the realized income.

The revenue tax shall be modified in accordance to the international accountancy standards and by the introduction of the self-declaration of realized revenue, declared the Finance minister, adding that the suggested packet of budgetary regulations represents a step further, towards the reaching of a transparent management of the public expenditures.

Mr. Djelic emphasized his pride of the fact that the Serbian fiscal system has been stable for the third year in a row, and added that the realized revenues are exactly matching the plan, as well as that in the current of 2003. sufficient reserves have been created for the next year, which represents another great step forward.