Q:
A:
2005 budget is non-inflationary and developing
Belgrade,
13 November 2004
Serbian Minister of Finance Mladjan Dinkic spoke in an interview for Blic daily about the 2005 budget, tax relief for the economy and citizens, upgrading salaries in the public sector, and other current topics. The government’s official websitr presents excerpts of the interview.
Mladjan Dinkic
On 2005 budget
The 2005 budget is non-inflationary and developing. We will conduct a policy of budgetary savings and also reduce corporate and citizens’ taxes. There is room for savings, which we proved by this year’s budget revision. On the contrary, Serbia has gained much as there are chances for tax cuts thanks to restrictions in spending.
All promises from the election campaign refer to the government’s full four-year mandate, so we have not managed to fulfill everything. But we did fulfill half of what was promised. As for reducing contributions on salaries, new employees will pay 52 out of 100 dinars on taxes as of January 1. That’s what I promised, but it will be applied only to those newly employed. There are around 970,000 people registered at the employment bureau. They represent a whole army of new workers, and I expect we can increase employment through this measure, which will be one of the priorities for 2005.
On further tax relief
We cannot do everything overnight. I’ve been finance minister for eight months only. Next year, when we additionally reduce public spending, we will see how much space for further tax relief is left. I am sure we are going in the right direction.
On possibilities of price jumps after the introduction of the value-added tax (VAT)
Our law was drafted in line with those from Europe. There will be no additional rises in price, the present 20 percent sales tax rate will be replaced by an 18 percent VAT rate, which is two percent less, and that rate will be applied on 90 percent of goods. The goods that are taxed zero percent now will be taxed 8 percent, but there does not have to be a jump in price if traders lower their margins. Maybe some goods will jump, some will go down, and the general level of prices will not rise. We expect lower inflation in 2005 than this year, i.e., 9.1 percent.
On cutting subsidies
We will cut subsidies to the socially owned sector as we want to speed up the restructuring and privatisation process.
On increase of salaries in the public sector
Teachers with a university degrees can expect a 30 percent raise, other teachers will get a 20 percent raise, those non-qualified will receive a nine percent raise. Employees in cultural institutions and social protection institutions will also get considerable raises. Others will be given a 9.1 percent raise according to the projected inflation.
The 2005 budget is non-inflationary and developing. We will conduct a policy of budgetary savings and also reduce corporate and citizens’ taxes. There is room for savings, which we proved by this year’s budget revision. On the contrary, Serbia has gained much as there are chances for tax cuts thanks to restrictions in spending.
All promises from the election campaign refer to the government’s full four-year mandate, so we have not managed to fulfill everything. But we did fulfill half of what was promised. As for reducing contributions on salaries, new employees will pay 52 out of 100 dinars on taxes as of January 1. That’s what I promised, but it will be applied only to those newly employed. There are around 970,000 people registered at the employment bureau. They represent a whole army of new workers, and I expect we can increase employment through this measure, which will be one of the priorities for 2005.
On further tax relief
We cannot do everything overnight. I’ve been finance minister for eight months only. Next year, when we additionally reduce public spending, we will see how much space for further tax relief is left. I am sure we are going in the right direction.
On possibilities of price jumps after the introduction of the value-added tax (VAT)
Our law was drafted in line with those from Europe. There will be no additional rises in price, the present 20 percent sales tax rate will be replaced by an 18 percent VAT rate, which is two percent less, and that rate will be applied on 90 percent of goods. The goods that are taxed zero percent now will be taxed 8 percent, but there does not have to be a jump in price if traders lower their margins. Maybe some goods will jump, some will go down, and the general level of prices will not rise. We expect lower inflation in 2005 than this year, i.e., 9.1 percent.
On cutting subsidies
We will cut subsidies to the socially owned sector as we want to speed up the restructuring and privatisation process.
On increase of salaries in the public sector
Teachers with a university degrees can expect a 30 percent raise, other teachers will get a 20 percent raise, those non-qualified will receive a nine percent raise. Employees in cultural institutions and social protection institutions will also get considerable raises. Others will be given a 9.1 percent raise according to the projected inflation.
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