The Fiscal Council considers that progressive income tax cuts will be implemented in 2020 to partially offset the effects of the (too) large increase in the minimum wage on employers who recruit predominantly low-wage workers.
The growth of economic activity in Serbia in the next period could be significantly influenced by the reduction of the tax burden on wages. In this way, the Fiscal Council of Serbia would reduce labour costs and make the national economy more competitive compared to the countries of the region. At the same time, a reduction in employment costs would stimulate a further decline in the unemployment rate.
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Tax rates in Serbia are actually lower than the average in Central and Eastern Europe and significantly lower than in the developed countries of Western Europe.
Current data from the Ministry of Finance indicate that the IEP will contribute to a reduction of 0.5 percentage points, from 26 to 25.5 and that the non-taxable segment of wages will increase from 15,300 to 16,300 dinars. The overall effect of these measures will be to disburden the economy by about 9 billion dinars in 2020.
The available amount in the state budget that could be used to reduce taxes in 2020 is about 20 billion dinars. However, if a rebalancing of the 2019 budget is foreseen, which stipulates a wage growth in the public sector significantly higher than the expected economic growth rate, the fiscal amount available for tax cuts will be practically halved (to about 10 billion dinars).
The Fiscal Council considers that it is economically unjustified to use such limited fiscal resources to reduce VAT rates and that there is no indication that the current corporate tax rate of 15%, in line with the regional average, constitutes a significant obstacle to economic growth in Serbia. Moreover, the large reductions of this tax in the period to 2012 have not led to a significant improvement in the economic environment.
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