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The Government of the Republic of Serbia

In the service of citizens

Clamp down on cigarette smuggling to bring in additional three billion dinars

Belgrade, 14 April 2004

The Serbian government will seek to reduce the grey economy share in GDP from the current 50 percent to at least 20 percent, Serbian Minister of Finance Mladjan Dinkic said in an interview with Belgrade daily Vecernje Novosti, adding that the crack down on cigarette smuggling is expected to boost state coffers with some three billion dinars. The official web site of the Serbian government brings excerpts from the interview.

Mladjan Dinkic

On curbing the grey economy:

A crack down on cigarette smuggling is just the start of a fight against all forms of large-scale smuggling in Serbia. The government aims to reduce the grey economy share in GDP from the current 50 percent to a bearable 20 percent within a year. Just before the Easter Holidays, inspectors toured over 2,400 kiosks in 26 towns across Serbia. Every kiosk in which they found at least a pack of cigarettes without excise duty stamps or with forged excise stamps was closed for 30 days, the smuggled goods seized and criminal charges brought against kiosk owners. The Law on Tobacco stipulates even more strict penalties which we will start to apply shortly.

On whether the so-called "TP 84" plan to curb cigarette smuggling applies to wholesale dealers and importers as well:

I ordered the Tobacco Agency yesterday to warn all wholesale cigarette dealers selling their goods to kiosks for cash at lower prices that what they do is illegal. The warning will be followed by detailed controls. It is very difficult to prevent cigarette smuggling. Cigarettes are not entering the country only through customs checkpoints. There is a lot of smuggling activity taking place over the Drina river, Montenegro and the administrative border line with Kosovo. The plan to curb cigarette smuggling is expected to bring in an additional three billion dinars.

On government's bill on changes to the Law on excise tax, and additional funds that will be poured into the state budget once the law is adopted:

We will abolish excise tax for seven products - heating oil, engine oil, heavy fuel oil, butane gas, ethanol, and homemade juices and nonalcoholic drinks. On the other hand, we will increase excise tax for foreign juices and nonalcoholic drinks, petroleum, diesel, and for all hard drinks, excluding the homemade fruit brandy and wine brandy. The government adopted an amendment submitted by some caucuses, according to which the excise tax for class A cigarettes will be increased two dinars, and for class B and C one dinar. I held a meeting with representatives of the multinational companies that bought tobacco industries from Nis and Vranje (DIN and DIV), who said that they will increase investment in Serbia this year and help us suppress smuggling.

On how the increase in excise tax will influence inflation growth:

In case that this increase is fully included in the product price, it will influence inflation growth by 0.46 percent. Therefore, it would perfectly fit in the projected annual growth in inflation rate, which ranges from 8.5 to 9 percent.

On changes in the financing of the State Union of Serbia-Montenegro:

This year, Serbia has a budget that finances the costs of the State Union only on the territory of Serbia, in line with the Constitutional Charter. Late last week I had a meeting with the Minister of Defense, senior officials of the General Staff and the Montenegrin Minister of Finance. In its budget, Serbia earmarked as much as 3.7 percent of the GDP for the financing of the army, while Montenegro set aside only 2.3 percent of its GDP. The Montenegrin budget envisaged to pay only eight salaries, not a single pension and very modest funds for financial costs. Owing to such an unrealistic projection of the Montenegrin budget, we currently lack €26 million for proper functioning of the Army on its territory.

On financing diplomatic and consular missions abroad:

This year, we shared the financing of the State Union's diplomatic and consular missions with Montenegro. We provided sufficient funds for our missions in London, Paris and Washington, since these three centres are very important for Serbia.

On whether one of mobile operators will be sold this year:

The Serbian Ministry of Finance thinks that the state should sell its stake in the Mobtel mobile operator, but the government's commission should establish its exact value beforehand. Since the commission was given the deadline to do that by May 1, and that the tender procedure lasts from six to seven months, theoretically speaking it is possible that Mobtel will be sold this year and that these funds will go to the state budget.