Salaries, pensions in Southeast Europe show alarming co-relation
12/06/2012
Global recession is affecting the unemployment rate, causing pension fund problems, which in turn nourishes the grey economy throughout the Western Balkans.
By Ivana Jovanovic for Southeast European Times in Belgrade -- 12/06/12
 The future of the Western Balkans' pension funds looks grim. [Reuters] |
An increasing number of pensions and a decreasing number of salaries are having alarming effects on regional economies. Pensions are financed from state funds, which are drawn from salary taxes. Growing unemployment, illegal work, and delays in receiving salaries are the main culprits for the trend.
The difference between the number of employed and the number of pensioners in Serbia is 46,000, with the retired being the higher number.
According to the Serbian Statistical Office estimates, around 60,000 workers do not receive a salary, and in turn, the state cannot draw the taxes from the unpaid salaries.
"Serbia has no financial discipline, and the tax collection is poor. Public companies and those in restructuring led by the state are the worst," Ranka Savic, the director of the Association of Independent Unions of Serbia, told SETimes.
Out of Serbia's workers, 31% work for the state, in the public sector and companies.
The rest, according to the Serbian Employers' Association, are part of the country's grey economy. The majority of workers flock towards illegal work due to high state tax rates: 63.5% of legal salaries goes to the Serbian government.
"The business sector lost 190,000 workers since 2008. So it's not surprising that there is less money for the pensions. Additionally, with the reduction of the number of employees, the number of pensioners increased," Dragoljub Rajic, the Serbian Association of Employers spokesman, told SETimes.
Drazenko Lukac, from the Serbian Chamber Of Commerce, said that the idea of pension fund restructuring, changes in tax and insurance politics, and improvement of general employment, is based on the sale of state-owned Telecom which holds market monopoly.
"Telekom Serbia net profit equals 3.39% of the national pension funds total expenditures, which means that selling 51% of Telekom Serbia, and transfer of 49% to the national pension fund would improve the current situation and the future of all taxpayers," Lukac told SETimes.
In Croatia, the relation between the taxpayers and pensioners is 1.19:1. With the aim to stop this trend, the country launched a new tax law and lowered health insurance tax by 2%.
The new measure in Croatia found that 21,000 employers have not paid taxes for 121,000 workers, according to government data. Under the new law, the number of taxes paid increased and some companies started to negotiate their tax-debt payment.
"This [law] will not have a significant impact on the number of employers -- so it can, symbolically, make better relation of salaries to pensions. [Although] there is the risk of illegal work expanding, in combination with the tax law obligation and tax inspection control, negative consequences could be minimised," Nikola Bakasaj, an analyst at the Croatian brokerage company Fima Security, told SETimes.
The situation is alarming in neighbouring Federation of Bosnia and Herzegovina (FBiH) as well, where about 220,000 retirees received a pension last month, while 240,000 workers received salaries. The total number of unemployed in FBiH was over half a million in May, which indicates that pension debts are steadily increasing.
In the other entity, official data from the Agency for Statistics of Republika Srpska indicate there are 1.18 pensioners to each worker.
"The question is whether people working for their pensions now will get them in the future. It is only a matter of time when the BiH pension system will collapse," Goran Radivojac, professor of economics at the Banja Luka University, told SETimes.
In Montenegro, the situation is somewhat better since there are 162,569 employed and 100,000 pensioners, according to the country's Statistical Office.
SETimes correspondent Drazen Remikovic in Banja Luka contributed to this feature.
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