Minister announces reform of fiscal system

Finance Minister Diana Dragutinovic announced that a reform of the fiscal system would be built into the 2011 state budget. She said before the assembly of the Serbian Chamber of Commerce (PKS) in Belgrade today that public spending will be limited and more cautious, parallel to lower taxes on production contributions to wages, and higher taxes on spending. Minister announces reform of fiscal system “Tax reforms should secure conditions for new economic growth based on strengthening competition of the domestic industry and increasing exports, as well as a more just and effective way of charging taxes,” she said. She said that taxes are expected to be decreased by 30 percent, as well as contributions on wages by increasing the level of non-taxable wages to RSD 16,000. “Decreasing budget income with a decrease in the charges on wages, in order to boost production, investments, employment and exports, must be compensated for with an increase in other taxes, and it is most acceptable to change the way in which Value Added Tax (VAT; Serbian: PDV) is collected,” Dragutinovic said. She said that the average VAT rate is 14 percent in Serbia, which is among the lowest in the region. The minister added that there is a possibility that there will be higher excise taxes on cigarettes and alcohol as well. Dragutinovic said that there are “misunderstandings in the public” that great savings in the budget can be made by decreasing expenses for the state administration and employees paid from the budget. “Public spending has been decreased by two percent in the last two years and is now at 44.5 percent of the gross domestic product (GDP) and with fiscal limits it can be decreased another two percent,” Dragutinovic said. She said that there will also be changes in the taxes on property in order to abolish payments for compensations on city construction property, and establish a basic principles for calculating these taxes based on the market value of the property. Chamber of Commerce President Milos Bugarin said at the same gathering today that the business community supports the draft for lowering taxes and contributions for wages, but is against increased taxes on spending and increasing of VAT rates. He also recommended reforms of the tax administration, in order to effectively implement the tax reforms. Dragutinovic and Bugarin in Belgrade today (Tanjug)

Minister announces reform of fiscal system

“Tax reforms should secure conditions for new economic growth based on strengthening competition of the domestic industry and increasing exports, as well as a more just and effective way of charging taxes,” she said.

She said that taxes are expected to be decreased by 30 percent, as well as contributions on wages by increasing the level of non-taxable wages to RSD 16,000.

“Decreasing budget income with a decrease in the charges on wages, in order to boost production, investments, employment and exports, must be compensated for with an increase in other taxes, and it is most acceptable to change the way in which Value Added Tax (VAT; Serbian: PDV) is collected,” Dragutinović said.

She said that the average VAT rate is 14 percent in Serbia, which is among the lowest in the region.

The minister added that there is a possibility that there will be higher excise taxes on cigarettes and alcohol as well.

Dragutinović said that there are “misunderstandings in the public” that great savings in the budget can be made by decreasing expenses for the state administration and employees paid from the budget.

“Public spending has been decreased by two percent in the last two years and is now at 44.5 percent of the gross domestic product (GDP) and with fiscal limits it can be decreased another two percent,” Dragutinović said.

She said that there will also be changes in the taxes on property in order to abolish payments for compensations on city construction property, and establish a basic principles for calculating these taxes based on the market value of the property.

Chamber of Commerce President Miloš Bugarin said at the same gathering today that the business community supports the draft for lowering taxes and contributions for wages, but is against increased taxes on spending and increasing of VAT rates.

He also recommended reforms of the tax administration, in order to effectively implement the tax reforms.