Fiscal Council sceptical about tax breaks for employers

The proposed tax incentives will not help resolve the issue of unemployment or deliver a major blow to the gray economy, the Fiscal Council has said.

Source: Tanjug

The proposed legislation would have employers temporarily exempt from paying a part of their income tax and contributions for newly hired workers.

The Council - an independent state organ that reports to the Serbian parliament - submitted its opinion the Finance Committee relating to changes to the law on contributions for mandatory social security insurance and law on income tax.

"It is not realistic that the proposed tax relief alone will lead to a marked shift, channeling the labor force from the gray market into legal streams, or to a considerable drop in joblessness either," the Fiscal Council notes.

Therefore, it is also not realistic to expect an increase in public revenues on these grounds.

The Fiscal Council also notes that a high unemployment rate in Serbia, as well as in most countries in the region, is of structural nature and requires proper structural reforms that would ensure improvement in the labor legislation, conditions more conducive to business and greater competitiveness of the domestic economy.

The Fiscal Council does not agree with lawmakers that pension contributions should be raised from 24 to 26 percent, while at the same time reducing health care contributions for the same amount, from 12.3 to 10.3 percent.

"The proposed measures will not change the existing level of fiscal burden that pays impose and thus it will not have an impact on the economic activity," the Council notes.

The proposed laws envisage that employers should be exempt from the obligation of paying a part of the tax and contributions from 65 to 74 percent for newly hired employees in the period from June 2014 to June 2016.

With these changes, lawmakers wanted to stimulate the legalization of the existing labor force in the gray market.

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