Serbia Plans Tax on Wealth, Higher VAT

As a part of the plan to fight the economic crisis, the new government plans to change the tax policy, increasing taxes on the rich and raising VAT.Serbia’s Minister for Trade, Rasim Ljajic, said the biggest problem facing the new government is not Kosovo or EU integration but the difficult economic situation – and promised a raft of new measures.“For September we are preparing a radical fight against the crisis, imposing bigger taxes on those who have the most but also saving money on every possible level,” Ljajic said.

Salaries of public servants will also be limited to 160,000 dinars [1,500 euro] a month, he added.

Previous governments also experiment with progressive taxation, but the income from the so-called “tax on the rich” was less than expected, so it was scrapped.

In 2009 such taxes brought in a mere additional 14 million euro, so the tax was aborted after just a year.

The Serbian Assembly will revise the state budget in September, after which the increase to VAT will follow, the Minister for Finance, Mladjan Dinkic, announced.

Dinkic said the new VAT rate will not exceed 20 per cent, up from 18 per cent today. For provisions, VAT will stay at 8 per cent.

The government also plans to renew the agreement with the International Monetary Fund, after IMF negotiations on an extra cash injection failed in February.

In its regular monthly report, the National Bank of Serbia announced on Wednesday that Serbia will remain this year in recession with an expected inflation rate of 10 per cent.

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