For many years now, Serbian government has been giving subsidies to foreign investors, and also for many years, economy experts have been doubting their effect. Judging by how much tax foreign investors pay, it seems that economists were right to doubt.
Economy expert Dragovan Milicevic has looked through the cash flow statements of some of the biggest Serbian companies, and came to an interesting conclusion – the biggest ‘state projects’, like Fiat and Air Serbia, contribute the least to the Serbian budget despite the government providing huge subsidies for them.
According to the 2015 balance sheets (the ones for 2016 still haven’t been revealed), Fiat, which is the fourth biggest company in Serbia judging by its business income, paid 173.7 million dinars into the Serbian budget which includes VAT, excise, custom clearance fees and other state fees. Fiat also paid zero dinars towards profit tax. The stated amount makes up only 0.12% of the company’s business revenue.
The second big, state-funded company, Air Serbia paid 90 million dinars into the Serbian budget in 2015, out which 12.8 million dinars went towards profit tax which makes up 0.27% of the company’s business revenue for that year. Air Serbia and Fiat had a 0.01% and 0.02% share in the state’s total tax revenue respectively.
One of the Serbian government’s main arguments for giving subsidies to foreign investors was that the money spent on them would return to the state budget through payment of taxes contributions. The cases of the two aforementioned companies show otherwise.
“The companies that the state gave the biggest subsidies contribute the least to the state budget. Furthermore, nobody knows for fact how much subsidy money did the state give to Fiat. Regardless, nothing much was gained from it. Considering that the state actually pays the salary contributions for Fiat’s employees, the whole situation seems even worse”, Milicevic adds.
A Belgrade Faculty of Economics professor, Ljubodrag Savic says that another problem is that the government has been hiding the contracts with these companies from the general public.
“I have tried to find out about the subsidies that Fiat received from the state, and I couldn’t find any official data. Obviously, the deal with Fiat doesn’t have much of an effect on the state budget apart from the company contributing to better statistical data regarding industrial production and export. As far as I know, the state gave over 300,000 square metres of production space to Fiat. Also, this company is exempt from paying taxes and contributions. Prime Minister mentioned earlier something about import VAT, but Fiat exports most of its products, hence they are entitled to VAT return.
Savic argues that if the same amount of money was invested in the domestic food industry, the effects would be far better. In our food industry, over 80% of the input is domestic, and entire chains of companies and the state budget would benefit from that. And no subsidies would be needed.
This post is also available in: Italiano