As a general line of reasoning, the stricter control over the activities of the economy in transition which is also experiencing growth, could generate real benefits if they are well-thought-out, based on principles of good governance and applied impartially. They could result in various benefits, including:
– Increased transparency: tighter control can ensure that businesses operate transparently, reducing the possibility of corruption, fraud and other illegal activities that can undermine confidence in the economic system;
– Market fairness: with clear regulation and effective controls, all businesses are subject to the same rules, preventing unfair competition and ensuring a level playing field for all economic actors;
– Attracting foreign investments: foreign investors tend to prefer markets with clear regulations and where their investments are protected. Thus, control can increase the confidence of foreign investors and attract more foreign capital;
– Financial stability: control can reduce the risk of financial crises, providing greater stability to the entire economic system;
– Consumer protection: specific control over economic activities can ensure that consumers enjoy quality products and services, preventing fraud and protecting public health and safety;
– Increased tax revenues: stricter control can reduce tax evasion and ensure that businesses pay the taxes they owe, increasing government revenues and financing essential public services.
The shadow economy is worth more than 20 percent of Serbia’s Gross Domestic Product. In 2017, with a national GDP of just over $44 billion, it was estimated to reach 22 percent, while in 2021, with a GDP that has exceeded $63 billion, certain economic studies put it to just over 20 percent, which in real terms means that the total volume has increased from about $9 billion to about $12.5 billion, which is an increase of more than 25 percent in real terms in just a few years. In this context, what aspects of Italy’s experience in combating the shadow economy do you consider relevant for Serbia?
Tax evasion is a serious obstacle to economic development because it distorts competition and allocation of resources, undermines the relationship of trust between citizens and the state and penalizes equity, taking away spaces for intervention in favour of the weaker social groups. Hence the importance of the surgically precise action carried out by the Guard of Finance in Italy against tax evaders and fraudsters. Countering tax evasion means contributing to the prospects for recovery and revitalization of a country’s economy and encouraging a fairer distribution of the tax levy among citizens (“all pay to pay less”).
Combating the shadow economy is a complex challenge that requires a multifactorial approach. Italy, having a long history of combating tax evasion and the shadow economy, has developed several strategies and experiences over the years that could be useful. From technological remedies, such as the electronic invoicing system, which is mandatory for many commercial transactions, and the use of big data and predictive analytics to identify suspicious behaviour, to tax policy interventions such as the introduction of favourable tax regimes that reduce the tax burden for small businesses as well as “voluntary disclosure” programmes that allow tax evaders to regularize their position with reduced penalties. Considering its specific economic and social reality, Serbia could consider which of these aspects are best suited to the local context and how to adapt them to maximize effectiveness in combating the shadow economy.
On the other hand, the Guard of Finance (GdiF) has about 60,000 staff, while the Serbian tax police have only a few hundred. In what areas could the GdiF train Serbian personnel?
As already anticipated, the Guard of Finance has implemented, over time, fruitful policies of development cooperation and capacity building for the benefit of Law on Enforcement Authorities and Collateral Police Bodies of a large number of countries in the world. In this area, thanks to its vast experience and expertise, the GdiF offers a wide range of education and training programmes. Such training takes place through exchange programnes, seminars, specialized courses and other joint initiatives. Here are some areas in which the GdiF could contribute:
– tax investigations: train staff on how to conduct complex tax investigations, interpret accounting evidence, recognize various forms of tax evasion and fraud, and use advanced tools and technologies to track suspicious transactions;
– accounting investigations: impart skills on how to perform tax audits, assess corporate tax compliance, and detect anomalies in financial statements and tax returns;
– counterfeiting: the GdiF has developed considerable experience in combating counterfeiting of goods and services;
– combating money laundering: training on how to identify and prosecute cases of money laundering, with a focus on international financial flows and concealment techniques. Monitoring financial flows is the most effective method of detecting capital of illicit origin, preventing and countering forms of money laundering that can pollute the legal economy and distort competitive conditions;
– financial intelligence techniques: train staff on the use of intelligence tools to gather information, analyze large amounts of data, and identify criminal networks operating in the shadow economy;
– anti-corruption: the GdiF also has experience in fighting corruption within public institutions. Corruption alters the rules of healthy competition among businesses, harms the honest ones and raises the costs of public services, to the detriment of their efficiency. Fighting corruption means reviving the economy. Reviving the economy means securing our future and, above all, that of our children. Fighting corruption means affirming meritocracy and healthy competition among businesses, to the benefit of the quality of services provided and works carried out;
– computer investigation techniques: given the increasing digitization of economic transactions, it is essential to train staff on computer investigations and digital forensics.
The fight against food counterfeiting and manipulation is a flagship of the GdiF and a good example of how prosecuting a crime protects fair competition and consumer health. In what segments in Serbia can the GdiF’s expertise help and what proposals could you give?
In general, counterfeiting is a multiplier of illegality. It feeds the promotion of undocumented workers, tax evasion, money laundering, and organized crime. Effectively combating counterfeiting also means safeguarding the productive fabric of a country particularly exposed to its harmful effects. Just as fighting counterfeiting helps to boost the competitiveness of companies internationally.
The production and marketing of counterfeit goods are the source of significant tax revenue losses, resulting in decreased growth for the country and reduced public services for citizens. People who buy counterfeit goods put their health at risk. Counterfeiting and trade in non-genuine and unsafe products damage the market, taking opportunities and jobs away from law-abiding businesses. Honest citizens, businesses and professionals who abide by the rules can find a safe point of reference in the Guard of Finance. The fight against illicit supply chains of fake Made in Italy products, for example, takes on strategic value and aims to protect national productions that stand out for their high quality.
In this context, protecting the agribusiness sector from counterfeiting phenomena means safeguarding one of the symbols of Italy and Serbia in the world. Agribusiness piracy is often connected to other economic and financial offences, such as fraud against the European Union budget, counterfeiting of industrial trademarks, tax evasion, undocumented workers and fraud against the social security system.
Finally, countering the dissemination of products that do not comply with safety standards means helping to ensure effective consumer protection and a competitive market where honest economic operators can benefit from a level playing field. Infringement of intellectual property rights is an extremely lucrative illegal activity for criminal organizations and generates significant damage to the economy. The GdiF is able to strike, in their totality, all those phenomena that constitute obstacles to the growth and realization of a fully competitive market on which to base the development of a more equitable society attentive to everyone’s needs.
In 2024, the Guard of Finance is preparing to celebrate its 250th anniversary. For almost two decades, one of its experienced officers has been posted in Serbia, working with local institutions in order to improve the business environment. Can you tell us more about the activities that your staff carried out in Serbia?
The Guard of Finance has specific competencies in the economic-financial sector and performs judicial, administrative and public security police tasks. It was established in 1774, during the reign of Victor Amadeus III of Savoy. The GdiF is the Italian and EU Economic and Financial Police, with a military order, directly subordinate to the Minister of Economy and Finance.
In its operational projection, it selects control objectives through prodromal intelligence and economic control of the territory, enhancing the risk analyses and project initiatives of the Special Component. It cooperates with the judicial, criminal and accounting authorities, including the European Public Prosecutor’s Office. Therefore, it protects the economic, financial and property interests not only of Italy, but also of the European Union, with a multiplicity of competencies.
The presence of the Guard of Finance staff in foreign territory is a necessary operational area to deal with economic-financial offences that are increasingly transnational in nature and has led to a strengthening of the cooperation network that oversees the work of Expert Officers, Liaison Officers and support personnel at Italian diplomatic representations, international organizations or foreign collateral bodies in 75 countries around the world. Its strategic role aims to strengthen international cooperation and information interchange between foreign bodies to combat tax evasion and avoidance, money laundering, terrorist financing, corruption, smuggling, fraud, illegal immigration and arms, narcotics and counterfeit product trafficking. The GdiF also invests investigative effort that aims to consolidate the primary role built over time by the military forces beyond national borders, thanks to its exclusive expertise in economic-financial matters both at sea and on land.
What are the main results of cooperation between the Guard of Finance and Serbian institutions in recent years?
The Guard of Finance has established cooperation with many nations to share its expertise in economic-financial control. It plays a key role in the protection of the economy and finance in Italy and, thanks to its experience and specialization, is in demand for cooperation with so many foreign institutions to promote legality and transparency internationally. The prevention and countering of economic and financial malfeasance increasingly determine the projection across borders of the GdiF’s activities, as an effect both of the transnational dimension assumed by organized crime, which is always ready to take advantage of the opportunities offered by globalization, and because of the strategy it adopts, relocating the proceeds of its illicit activities abroad, in an attempt to minimize the risk related to seizure and confiscation activities.
The GdiF assumes a preeminent role as an economic-financial police force with general competence, enhancing the targeted law enforcement actions undertaken domestically and internationally through full and effective cooperation with domestic and foreign law enforcement authorities.
In Serbia, as in other countries, the objective of this collaboration has concerned and concerns the following:
– training, in recent years providing training support to Serbian institutions on financial investigation techniques, the fight against tax evasion and fraud prevention. In 2023 alone, as part of regular development cooperation and capacity building initiatives carried out for the benefit of local authorities, e-learning courses were held by the School of Economic and Financial Police:
– International policies to fight money laundering and terrorist financing;
– Economic and financial strategies for targeting criminal assets to reduce organized crime;
– Tax and crime global project – basic training which was attended by 25 officials from the Tax Police, the Administration for the Prevention of Money Laundering and the Customs Agency of the Republic of Serbia;
– exchange of information, in accordance with the International Conventions for the Avoidance of Double Taxation in Direct and Indirect Taxation as well as technical understandings (memoranda of understanding) to accelerate information exchange. A Memorandum of Understanding on information exchange with the Tax Police and an MoU, for training purposes, with the Ministry of Justice are currently in place. Procedures are being finalized to enter into an MoU with the Customs Administration of the Republic of Serbia;
– joint projects, ad hoccon collaborations with the Serbian authorities within the framework of operations and aimed at improving the business environment and ensuring greater financial security in the country.
Serbia is strongly committed to the political and economic initiative called “Open Balkans” which aims to improve trade and cooperation among the participating countries, currently Albania and North Macedonia, as well as Serbia itself. What opportunities and complexities do you see in the development of a model that should simplify the movement of goods and people in the countries involved?
The Open Balkans initiative is certainly a significant step toward creating a free trade area in the Balkans, aiming to facilitate the movement of goods, services, capital and people among the participating countries. The main goal is to promote regional cooperation, stimulate economic development and attract investment, as an integrated market could lead to increased intra-regional trade, supporting economic growth in the countries involved.
On the other hand, greater economic integration can make the region more attractive to foreign investors through simplified trade procedures and the formation of a larger market, while collaboration could foster innovation and technological development through the sharing of knowledge and resources. Facilitating the movement of people can lead to a more flexible and dynamic labour market, enabling better allocation of human resources. Complexities pertain to the possible divergences between the accession countries, in terms of economic policies, national legislation and interests, which could be obstacles to integration, just as the lack of adequate infrastructure and connectivity could limit trade and investment in the region. Therefore, although the Open Balkans initiative offers many opportunities for economic development and regional integration, it is also accompanied by several challenges and complexities. Realizing its full potential will depend on the ability of the participating countries to overcome these challenges and work together constructively for the common good of the Region. Effective management of the complexities will require commitment, dialogue and compromise among the participating countries.
You have been living in Serbia for about two years. Beyond your role and institutional interlocutions, as a foreigner, what peculiarities do you perceive about the Serbian business environment?
Serbia has made significant economic progress and implemented structural reforms in recent years, aiming to align with European Union standards, although the accession process is still ongoing. It seems to me that during this period, the country has shown signs of economic stability and growth, with particular strength shown in the services and manufacturing sectors. The agricultural sector is also an important driver of the economy and the IT industry is growing rapidly. In fact, favourable policies have been implemented to attract technology companies and start-ups.
But what stands out visibly is the significant foreign direct investments here, often spurred by favourable tax conditions and relatively low labour costs. Indeed, the workforce is well-educated, with good knowledge of foreign languages. Investment in infrastructure, including transportation and renewable energy, is there for all to see. Just look at the Belgrade Waterfront.
The entrepreneurial mindset of young people, in general, appears to be growing, with an increase in the number of small and medium-sized enterprises. In summary, it seems to me that Serbia presents a very interesting economic environment, with many opportunities but also some challenges.
During his career, he has held important positions in the fight against organized crime such as those of section commander of SCICO (Central Service of Investigation on Organized Crime is a special department of the Guard of Finance) and commander of the second and fourth investigation group sections in Palermo. He has led GdiF territorial garrisons in various parts of Italy.
A lecturer in undergraduate, graduate and master’s courses, he boasts degrees in law, economics and administration, numerous master’s degrees, and has been a certified public accountant since 2019. Since June 2023, he has also been an expert of the Tax Administration of Serbia for Chapter 16 of the EU accession negotiations on taxation, tax avoidance and evasion and misuse of shell companies.