Serbia has plans to prevent tax evasion

15/02/2013

State plans to cross-check records to collect taxes on properties worth more than 350,000 euros.

By Igor Jovanovic for Southeast European Times in Belgrade -- 15/02/13

A new Serbian law requires citizens to report and pay taxes on high-priced properties. [Nada Bozic/SETimes]

Serbian citizens who own property worth more than 350,000 euros are obligated to report it to tax authorities under a new law that went into effect this year.

The reporting period began January 15th and will last until March 31st. In April, properties will be cross-checked in order to determine whether anyone has evaded taxes. If there is a discrepancy between a citizen's reported property and revenues, it will be taxed at a rate of 20 percent. Criminal charges will be pressed against all who evade taxes, the tax administration announced.

The state does not have an estimate of the amount of tax revenue it expects to collect as a result of the new law.

"The purpose of this entire endeavor is to determine whether an individual was able, with all the revenues we can fully see in various databases, to purchase property worth tens of millions of dinars or even more," Dragan Agatunovic of the Tax Administration's Control Sector told the Belgrade media.

"This measure was designed to finally launch the process of establishing tax discipline," Milica Bisic, adviser to the finance and economy minister, said.

In addition to reporting their earnings and property values, citizens also must declare patent rights and shares in companies. The property of their closest relatives also will be checked in a bid to prevent tax evasion by means of transferring property to one's relatives.

Milojko Arsic, a professor at the Belgrade Faculty of Economics, told SETimes that resistance to the tax administration action should be expected.

"Three groups may oppose the implementation of the law: small private business owners who did not report everything, tycoons who avoided admitting to everything they own, and criminals who obtained a portion of their property through illegal affairs," Arsic said.

He added that the law on cross-checking property is important as an instrument for suppressing the so-called gray economy, but also for identifying illegally acquired property.

As of February 10th, only nine people had reported their property, including the new head of the Tax Administration of Serbia, Ivan Simic, who occupied the same post in Slovenia and has now, "come to introduce discipline in Serbia's tax affairs."

The Tax Administration does not have an estimate of how many properties worth more than 350,000 euros there are in the country.

For property cross-checking to have a full effect, the law on the origin of property also needs to be passed, Zlata Djordjevic, an Anti-Corruption Agency Committee member, told SETimes. The law has not yet been introduced in parliament.

"Property tax returns of over 350,000 euros will definitely have a certain effect on the Serbian budget, but will also increase tax discipline in the state," Djordjevic said. "But a law also has to be passed that will enable the seizure of all property from those who cannot prove how they obtained it, ie from those found to have obtained said property by committing a criminal offense."

Elsewhere in the region, Romania has had a progressive tax on multiple properties since 2010. This year, the government increased the tax rates on second and third properties.

Montenegrin Prime Minister Milo Djukanovic said taxing wealth cannot be a substitute for what the government must do to ensure fiscal discipline.

"The proposal to solve the budget deficit problem by taxing wealth is a demagogic political message, because even those who made that proposal are aware that those measures could not be a substitute for what the government has to do in order to ensure fiscal balance," Djukanovic said in an interview with Radio Montenegro.

SETimes correspondent Gabriel Petrescu in Bucharest contributed to this report.

This content was commissioned for SETimes.com.