Keepin touch

Whether you have a question, comment, suggestion or any problem in the purview of the government, send us your message and we will try to respond as soon as possible. If your problem is not in our purview, we will forward your message to the relevant institution.

The Government of the Republic of Serbia

In the service of citizens

Government aims to stop growth of budget deficit permanently

Belgrade, 18 September 2012

Minister of Finance and Economy Mladjan Dinkic said that a set of laws for fiscal consolidation proposed by the Serbian government aims to permanently stop the growth of Serbia's budget deficit.

Author: Tanjug

Presenting the set of 24 laws at the Serbian parliament, Dinkic said that another three laws will be presented on Wednesday together with the budget review.

He stressed that this is just the first phase of fiscal consolidation and that it will create conditions for the budget deficit in 2013 to reduce to 3.5%, which is necessary in order to stop the growth of public debt.

An additional package of measures will be presented with the budget for 2013, and it will reduce the budget deficit to 3.5% of GDP next year, the Minister pointed out.

The Minister said that the aim in the coming weeks is adopt a medium-term plan of structural reforms that would enable the reduction of the budget deficit from the current 7% to 3.5% in 2013, 1.9% in 2014, and 1% in 2015, bringing the budget into balance in 2016.

Dinkic also said that Serbia's public debt currently totals around 56% of GDP and that it will reach 60% by the end of the year.

The debt will continue to grow this and next year by inertia, because of borrowing to cover deficits, and its growth will not stop until 2014.

Dinkic also said that Serbia's public debt currently totals around 56% of GDP and that it will reach 60% by the end of the year.

He said that this year alone the costs for paying the interest, after budget revision, will amount to RSD 66 billion, and in 2013 they will be RSD 90 billion, noting that such amounts are unsustainable, which is why the budget deficit has to be reduced radically.

He explained that it was necessary to change such a large number of laws, as for fiscal consolidation it is not enough to change just a few tax rates.

According to him, the government has opted for a package of measures to prevent the debt crisis and the "Greek scenario", and not to increase taxes on production, but to reduce costs while increasing certain taxes on consumption.

To protect those who are most affected by the crisis, the government proposed a package of measures that includes the elimination of 138 para-fiscal taxes, he said, adding that 300,000 small businesses and entrepreneurs will save a total of RSD 10 billion.

The Minister pointed out that the increase of public sector wages and pensions is limited to 2% in October this year and April next year, according to the real possibilities of the budget.

He recalled that in order to help the most vulnerable pensioners with incomes of less than RSD 15,000, the payment of the first instalment of the 13th pension began today, whose total amount of RSD 16,000will be paid in four instalments.

When it comes to tax law, the Minister said that systemic changes were made, and explained the amendments to the Law on tax procedure authorise the Tax Administration to monitor unregistered businesses.

Penalties will be introduced, for the state if it is late in returning the VAT, which introduces discipline in settlement of obligations, the Minister said, adding that benefits in returning the tax debt will be introduced.

According to him, this debt should be repaid in 24 instead of 12 instalments.

The Minister said that the amendments to the VAT law provide that VAT rate is increased from 18% to 20%, adding that the effect of this increase will be RSD 35 billion in budget revenues in 2013.

The Minister said that the rate of 8% on food has been kept, adding that the decision was made to return VAT on baby food and supplies for babies.

The right to this VAT return will be given to parents whose total monthly income is less than RSD 80,000 and whose property is not worth more than €200,000.