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The Government of the Republic of Serbia

In the service of citizens

Rule-book on property evaluation to be completed soon

Belgrade, 17 July 2006

Head of the Serbian Tax Administration Vladimir Ilic said in an interview today given to the daily “Blic” that the rule-book on property evaluation should be completed within the upcoming week, and will enter into force eight days from its publication in the Official Gazette of the Republic of Serbia.

The Serbian government’s official website presents excerpts of the interview.

How far back in time will property ownership have to be proved?

The starting point is January 1, 2003, when the Law on tax procedure and tax administration was adopted. According to Article 186 of that law citizens in possession of property worth more than 20 million dinars, €300,000 at that time, were called upon to register property. The limit of €300,000 was established as a standard, a sum of money which a person could earn in a lifetime from regular income. And the property includes a house or flat, weekend-house, car, money in the bank, all together worth from €200,000 to €250,000. And that is not a problem for the Tax Administration. The property being focused upon is that whose value exceeds this limit multifold.

Novelties introduced by the rule-book when compared to existing law:

The law did allow the possibility of property evaluations, but they were not conducted. Until now there was no rule-book on its implementation. Probably there were other priorities, such as fiscal cash registers, VAT and similar things. The rule-book regulates criteria for implementing property evaluation and very clearly defines the procedure and method for establishing tax base-line for taxation of property. The rule-book gives adequate treatment to persons concerned, family connections and everything is covered by it.

Lowering the income tax base-line to €900 monthly:

In Serbia perhaps three percent of the population earns €900. Those persons will not be subjected to property evaluation, but will pay income tax at the end of the year for the amount over €900. That is perhaps 15,000 dinars annually. Lowering the tax base-line, will increase contributions to the budget by a few million dinars, which is negligible.

Implementation of the rule-book:

All those will be taxed who are unable to prove that they have sufficient backing in realizable income for the property they possess. My rough estimate is that some 15,000 to 20,000 people are in question who possess property worth more than €300,000. These are sportspeople, show-business figures, politicians and of course, businesspeople.

Tax evasion:

This year we significantly increased the number of uncovered tax frauds, and we insist that the matter should be talked about publicly. The sums in question are enormous. We are filing criminal charges, but almost nothing is happening. A few weeks ago we had the first case where an unconditional custodial sentence of 4 to 5 years was imposed for tax evasion.

What sums are in question?

There are no reliable evaluations, but experience from countries in transition tells that we are talking about sums which are from 5% to 10% of the budget. If the budget is worth 400 billion dinars, then the sum is some 20 billion dinars or €250 million. Which means that one agrarian budget is lost through tax evasion. That much money cannot be earned through any other kind of crime.

Corruption within the Tax Administration:

I have strengthened the group for internal control which has its hands full. During the two years that I have been director of this administration, more than 300 disciplinary procedures have been started, and 15 persons have been dismissed. Most often because of giving tax attestations that someone does not owe tax, when in fact they do.

Do you already have a list of suspects for implementation of the rule-book?

They are all those persons whose property exceeds €1 million in value. I think that there are some 10,000 of them. But nothing spectacular should be expected to happen. It is important that a few clean cases are conducted which will end in court to serve as an example to others. Because the payment of tax is not enough satisfaction. Criminal responsibility must also be established.