Shadow economy mentioned for the first time in Serbia’s state budget

The term shadow economy has been mentioned for the first time in the state budget of Serbia. Although it can be found in only 13 spots in a document of more than 1,200 pages, this is a positive step forward, since the previous ten budgets have not addressed any of these issues.

On the other hand, plans to curb the shadow economy are highlighted only in individual areas and it is expected that more institutions will set up their own specific goals for the period 2019-2021. This omission should be compensated by the announced adoption of a revised National Program and the new Action Plan for countering shadow economy by the end of March.

As it has been impossible for the state to express the contribution of countering shadow economy to increased revenues in concrete figures, the effects have been assessed as positive but not accurately calculated.

It is important to mention that the shadow economy has generated more significant  attention in the program part of the budget, with precisely set goals in specific areas – reducing irregularities in issuing fiscal receipts, improving the detection of criminal offenses in shadow economy area, detecting unregistered companies and counterfeit products on the market, and countering illegal operations in the sectors of transport, urbanism and energy.

- The Years of countering shadow economy and the implementation of the National Program have produced a number of tangible results in this area. The greatest progress has been made in reforming inspections, simplifying the engagement of seasonal workers in agriculture and raising citizens' awareness through two rounds of prize games. At the initiative of NALED, a tax exemption was introduced for new businesses, providing an opportunity for young people and the unemployed to start their own businesses legally, with minimum costs and risk. Further priorities for businesses involve the modernization of the Tax Administration, abolition of para-fiscal chrarges and introduction of an official state e-registry of fees and charges – says Igor Lončarević, Vice President of NALED's Fair Competition Alliance and Partner and Head of Tax and Legal Affairs at KPMG.

In the program part of the budget, five institutions have set concrete goals for countering shadow economy over the next three years. The Tax Administration plans to reduce the share of detected irregularities in terms of issuing fiscal receipts, from 34.28% in 2016 to 31% over the next year, and to maintain this percentage by 2021 by strengthening the tax culture. Also, in the area of crime detection, the TA will seek to improve the tax evasion detection from 56.7% in 2016 to 64.5% in 2021.

The Market Inspectorate has the ambitious goal of reducing the number of detected unregistered firms, from 800 a year (2016) to 500 (2021). The plan is also to reduce the amount of counterfeit and pirated products in the market, from 200,000 (2016) to 90,000 during 2021.

With regards to the energy sector, the objectives have been set in terms of reducing irregularities in the control of petroleum products turnover and in areas controlled by the electricity inspection. The Ministry of Construction, Transport and Infrastructure has been the most ambitious in setting their goals. For example, the goal in the road transport sector is to reduce the share of irregularities found in all controls from 75% in 2016 to 55% in 2021. In the area supervised by the construction inspection, the aim is to reduce the share of irregularities found in the total number of controls from 85 to 70%, while the goal for the municipal inspection is the reduction from 90 to 75%.

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