Businessmen send message to the Government: Lower taxes, higher employment

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Serbian Chamber of Commerce has sent three initiatives to the Serbian government and juridical ministries: to reduce taxes and contributions on salaries, reduce corporate income tax from 15 percent to 10 percent and amend the Labour Law in order to prevent the possibility of employees abusing the sick leave, Vecernje novosti daily reports.

Namely, by reviewing rates of mandatory social contributions and rate of wage tax one can see that a higher burden on the earnings is realized through contributions, said Kristina Djuric, Head of the Centre for Legal and Economic Initiatives and Policies of the Serbian Chamber of Commerce.

Looking back several years earlier, a tendency of decline in the wage tax rate can be established – from June 1st 2001 it was 14 percent, from January 1st 2007 it was 12 percent, and from May 30th 2013 the rate that is implemented is 10 percent. On the other hand, mandatory social contributions show a growth trend. Thus, for example, the contribution rate for Pension and Disability Insurance Fund (PIO): was 22 percent from September 1st 2004, 24 percent from May 30th 2013 and as of August 1st 2014 the rate of 26 percent is being implemented.

“Taxes and contributions for employees’ salaries are very high, the tax wedge on labour income amounts to almost 63 percent, which means that the employer pays state a significant amount of total costs he or she incurred in terms of work fees,” Katarina Djuric points out. “In order to eliminate the problems identified, one should take the reduction of tax wedge into consideration, by reducing the contribution rate for the Pension and Disability Insurance Fund and health insurance, as well as finding another way to fund the healthcare system.

Businessmen also pointed out that further development of business and stimulating economic environment are influenced by the rate of tax on corporate profits. Provision of the Article 39 of the Law on Tax on Corporate Profits specifies a tax rate of 15 percent. Reducing the rate of tax on corporate profits from 15 percent to 10 percent would lead to faster economic growth of the country and better and more stimulating business environment, authorities of the Serbian Chamber of Commerce are of an opinion.

Besides that, a significant problem that has a negative impact on further growth and business development is an insufficient number of tax incentives / advantages for investments in fixed assets.