Serbia to focus on eliminating tax evasion, grey economy


The Serbian government plans to crack down on the grey economy and tax evasion in hopes of obtaining funds for the impoverished state budget.

By Igor Jovanovic for Southeast European Times in Belgrade -- 11/04/14


The new Serbian cabinet, which is expected to be led by Aleksandar Vucic, is expected to focus on the economy. [AFP]

Economic reforms will be among the main priorities for the new Serbian cabinet, Aleksandar Vucic, who is expected to take over the post of prime minister on April 25th, announced.

According to Serbia Economy Minister Lazar Krstic, the state budget loses between 850 million and 1 billion euros annually due to tax evasion and the grey economy.

Sasa Randjelovic, of the Faculty of Economics in Belgrade, told SETimes that the grey economy accounts for approximately 31 percent of Serbia's GDP, while the regional average is around 26 percent.

"The key is to make tax evasion less profitable, to increase the probability of getting caught if involved in the grey economy," Randjelovic said. "The most important thing is to increase the efficiency of the tax administration and make the penal policy more severe."

Milan Knezevic, a member of the Serbian Tax Administration Board of Directors, said the administration must have full political support to end the grey economy, which could endanger the budget unless "radical measures" are taken.

He said that currently about 50 to 60 percent of the turnover of goods and services in Serbia is taking place in the grey economy, most frequently in the food, textile and tobacco industries, as well as in hospitality venues.

"In the fight against the grey economy, several ministries need to operate in a co-ordinated manner," Knezevic said.

Last year the administration introduced an obligation for all Serbian citizens who own property worth more than 350,000 euros to report it to the tax authorities.

The subsequent check-up of revenues determines whether individuals were able to afford the property they own from the earnings reported. A criminal report is filed against those seeking to avoid tax payment.

"The purpose of this measure is to finally establish financial discipline," Milica Bisic, an adviser at the economy ministry, said.

Zlata Djordjevic, a member of the Anti-Corruption Agency Council, told SETimes that the new regulations on reporting property will help the Serbian budget, as well as increase financial discipline.

"For that measure to fully yield results, a law should be passed which would enable the confiscation of property from all who cannot prove how they acquired it," she said.

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That law may become a reality soon, because all parties in the election campaign prior to the March 16th vote said they would back a law on determining the origin of property, which would enable such confiscation.

However, Zlatko Minic of Transparency Serbia warned that the inconsistent implementation of laws often gets in the way.

"Serbia already has good laws that enable it to fight corruption and crime well. It is only a matter of whether there is enough political will to consistently implement those laws," Minic told SETimes.

What other measures can be taken to stop the country from losing money to tax evasion? Add your opinion below.

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