FISCAL COUNCIL: Announced employers benefits are not good

Proposed legislative changes prescribing temporary employers release from paying part of the tax and contributions for newly hired workers will not help solve the problem of unemployment , nor noticeably suppress the informal economy .
This is stated in the Assessment by the Fiscal Council referred to the Finance Committee of the Assembly of Serbia and regarding the Draft Law on Amendments to the Law on Compulsory Social Insurance and the Law on Personal Income Tax .
- It is not realistic that the proposed tax incentives would lead by themselves to noticeable transition of workers from the gray areas in the legal channels , nor to noticeable increase in the employment rate - said the Fiscal Council .
Therefore , as stated in this Assessment, it is not realistic to expect an increase of public revenues on this basis , even it can be expected marginal loss of revenues because certain successful companies which already planned to hire new workers in the next two years, will now submit to additional tax benefits.
Fiscal Council notes that the high unemployment rate in Serbia , as in most countries of the region is structural and requires adequate measures of structural reforms such as improving labor legislation , improving business conditions and increasing competition of domestic economy .
- Selected mechanism for achieving these goals is not consistent with good tax practice since it will make distortion between the tax treatment of current employees and new employees in the next two years - stands in the Assessment of the Fiscal Council.
Fiscal Council does not agree with the idea of the legislature to increase the rate of pension contributions from 24 to 26% and equivalently reduced contribution rate for health care from 12.3 to 10.3 % .
- The proposed amendments will not change the current level of fiscal burden on wages and thus will not affect economic activity - according to the announcement .
Drafts of proposed amendments to the laws prescribe employers release from the obligation of partial payment of tax and contributions from 65 to 74 % for the new employees in the period from June of 2014 to June 2016.
The legislators' idea is to encourage legalization of existing workers in the informal economy sector with introducing the benefits for new employees.

Fiskalni savet Republike Srbije

Finance Committee of the Assembly of Serbia

employment benefits

taxes and contributions

suppression of informal economy

law on compulsory social insurance

law on personal income tax

illegal labor