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The Government of the Republic of Serbia

In the service of citizens

Government passes five finance bills

Belgrade, 25 May 2006

Serbian Minister of Finance Mladjan Dinkic said today that the government approved five finance-related bills at the proposal of the Ministry of Finance and expressed expectation that the parliament will discuss these regulations in June.

Predrag Bubalo, Slobodan Vuksanovic and Mladjan Dinkic

Dinkic told a press conference that these bills regulate the financing of local self-government, foreign currency transactions and free zones as well as contributions for compulsory social insurance and citizens income tax.

The Minister noted that tax relief will amount to 31.5 billion dinars due to reduced income taxes and the introduction of an untaxed 5,000 dinar census on a monthly level.

The new regulations also stimulate youth employment, Dinkic said and explained that employers will not pay contributions for two or three years for newly employed employees under 30.

Incentives for employing workers older than 45 have also been presented in the new laws, he said and noted that those employers who by September 1 hire unemployed workers older than 45 will no longer pay for their income tax and will also be relieved from paying 80% contributions for those workers.

Employers who hire workers older than 50 will pay no income taxes or contributions for those workers, Dinkic said and added that incentives have been introduced for employing workers with disabilities.

With these regulations Serbia will get an attractive tax system, the Minister concluded and recalled that Serbia’s 10% profit tax is the lowest in Europe.

Dinkic said that the Bill on financing local self-government has been thoroughly discussed in public and that its main characteristic is real fiscal decentralisation, after the so-called Robin Hood method of the Council of Europe, which entails larger transfers to poorer municipalities at the expense of smaller transfers to richer municipalities.

Another characteristic of this law is that it enables predictability in planning the budget of local self-governments by guaranteeing the transfer of 1.7% of GDP from the previous year, the Minister said.

He said that a commission for financing local self-governments will be formed, which will be made up of 6 representatives of the Serbian government and 5 representatives of the Permanent Conference of Cities and Municipalities. It will be tasked with monitoring the implementation of this law.

Dinkic said that the adopted Bill on free customs zones will boost Serbia's exports, while the Bill on foreign currency operations will further liberalise that field.

He said that at today's session a Decree on establishing the Programme of distribution and use of funds intended for development of infrastructure in tourism for 2006, which envisages the distribution of 500 million dinars to several locations in line with the Strategy of Tourism Development.

Minister of Economy Predrag Bubalo said that the government adopted the Decree on the method and conditions for the privatised companies to meet their liabilities towards creditors.

Bubalo said that the government today decided to donate 30 tractors with follow-up equipment to returnees from Croatia with the aim of the more successful return of displaced persons.

The Minister pointed out that the government adopted the National Action Plan of Employment from 2006 to 2008. He explained that this comprehensive document aims to increase employment starting from macro economic criteria established by 2008.

Minister of Education and Sport Slobodan Vuksanovic said that the referendum in Montenegro was discussed at today's government session and that the government concluded that final results of the referenedum should be waited for.