Dragana Marković, Director of the Tax Administration of the Republic of Serbia

The implementation of comprehensive reforms of the Tax Administration of the Republic of Serbia is my absolute priority in the period ahead, says Tax Administration Director Dragana Marković, who recently began her new five-year term at the helm of this institution. “The basic objective of the reforms is to reduce the tax gap through the simplification of the way the obligations of our taxpayers are fulfilled, as well as the operating method within the administration itself, through the improving of existing operating processes and the introduction of new ones, in accordance with the best international practices.

This also implies the establishment of a new structure of operational processes within the administration, an integrated information structure, as well as a modern personnel and organisational structure,” explains our interlocutor.

You introduced a new organisational structure of the Tax Administration last year. How effective has it proved to be?

– Already in the first Transformation Programme, we defined several important determinants that relate to the automation of procedures, strengthening the centralisation of management and expanding the services we provide to users of our e-business services. The new organisational structure emerged as a consequence of all these activities, because we separated the basic and secondary activities of the administration, centralised the management of functions and reduced the need for taxpayers to physically visit our organisational units. We have largely achieved this by enabling all declarations within our jurisdiction to be submitted in electronic form and through the expanding of services such as eConfirmations and the establishment of a single tax box through which our communication will be channelled in the future. The importance of our eTaxes portal is also growing with this.

Figuratively speaking, our eTaxes portal has in the meantime become our largest branch, which testifies to its importance

Could it be said today that you are closer to what taxpayers want in term of uniformity in their treatment?

– I certainly see the strengthening of uniform operations of the administration as the greatest benefit of the new organisational structure, and that was the most common complaint of large taxpayers who operate throughout the entire territory of Serbia and who pointed out to us the insufficient uniformity of approaches of our branches in identical tax situations. By reducing the number of branches we have gained certainty that the administration acts uniformly in all 37 branches, because we have strengthened the degree of centralisation, the flow of information and the way decisions are made within the administration itself.

Another principle pointed out by taxpayers is “essence over form”. How much is that part of your practise?

– In our operations we have to take into consideration both the procedural and material aspects of the tax procedure, and we must be careful not to neglect either the essence or the form, because we are the executive body of the tax administration of our ministry of finance.

We established the principles of work and approaches in accordance with the best international practice and we constantly challenge and improve them through operations, but also in conversations with representatives of the professional community, which is a source of many constructive proposals. From all of the aforementioned, I can state that we determine the facts of tax according to their economic essence.

How did the Tax Administration pass the test in the transition to online work during the quarantine, and are you ready for the autumn if it turns out that there is a need to continue strict health measures to combat the pandemic?

– Upon the declaring of the state of emergency, we saw the full expressing of all our previous efforts and activities directed towards promoting electronic communication, filing tax returns and providing services to taxpayers electronically. 

The Tax Administration was certainly one of the state administration bodies of the Republic of Serbia that had the most challenges following the declaring of the pandemic. Challenges also relate to the internal structure of the administration, where it was necessary to implement measures of prevention and health protection for around 5,000 employees, while they also relate to the unfettered functioning of the system of determining, controlling and collecting public revenues from within our jurisdiction, but also to helping the Government of the Republic of Serbia in defining and implementing measures for mitigating the negative economic consequences of the pandemic for all taxpayers in the Republic of Serbia. We have formed a Crisis Staff in the administration, with three internal teams for operational works and measures to mitigate the consequences of reduced economic activity.

Considering experiences from the previous period, which segments of work would you prioritise for digitalisation in the period ahead?

– That’s certainly the most publicly visible part that relates to our activities, and which refers to the provision of services to taxpayers, and somehow in recent times that part has come to the fore in its full scope. But we shouldn’t forget that, in addition to this, we have very important operational processes that concern procedures for registering and making timely changes in registers, and managing accurately the state of tax accounting of taxpayers and the process of obtaining and analysing data that’s at our disposal with the aim of identifying risky behaviour and using instruments of control in determining recorded irregularities.

On the other hand, a no less important part relates to the ways in which we conduct education and develop an awareness among taxpayers regarding the reasons for, and importance of, voluntarily fulfilling tax obligations. A well-functioning health system is one such example.

In the coming period it is necessary for us to further digitalise services to taxpayers, and to do so in the direction of developing electronic communication and delivering data from taxpayers, but also continuing linking with other databases in the state administration. Likewise, it is important for us to work on the development of data analysis tools, with the aim of properly segmenting the risky behaviour of groups.

We also benefit greatly from the introduction of the “Your Taxman” counter, because we have eased communication and the realisation of tasks for taxpayers through a single and uniform procedure

How has the pandemic situation impacted on your regular control activities?

– According to the work plan of the Tax Administration under the conditions of the state of emergency, operational control processes that had to be done continuously during the state of emergency were confirmed, considering the degree of importance for conducting the process and the protection of employees due to the danger of spreading the contagious virus COVID-19. We continuously conducted works on fiscalisation, VAT refunds, excise rebates, maintenance of the unified register of taxpayers and issuances of tax confirmation certificates, while the tax controls commenced before the introduction of the state of emergency ended with the adoption of tax administrative acts.

For the duration of the state of emergency, orders were opened for the conducting of tax controls with taxpayers whose business is reflected in the most risky irregularities for the budget of the Republic of Serbia, and those controls were performed electronically, due to the need to protect the health of both taxpayers and tax inspectors.

What is the situation like today when it comes to the prevalence of the grey economy?

– All our efforts that make it easier for taxpayers to meet their tax obligations also have an effect on reducing the grey economy, but we are also aware that there will always be certain individuals and groups who attempt to extract benefits in the grey zone and in an illegal way.

The grey economy has been marked as one of the biggest challenges confronting the economy of our country, and the fight against it is one of the main priorities of the Tax Administration, with the objective of protecting the Budget of the Republic of Serbia.

A significant contribution of the Tax Police to suppressing and reducing the grey economy is realised through continuous work on the ground, where – in coordination with other state bodies – constant activities are carried out to suppress the illicit trade of goods and services in all spheres of the economy. In 2020, in cooperation with the Ministry of the Interior and the Security and Information Agency, nine actions were carried out and 29 people were detained. Nine criminal charges were filed on the basis of these activities.

In the action to suppress the illegal trade in tobacco and tobacco products, and other excise products, in the period from January to June 2020 the Tax Police, in coordination with other state bodies, seized 3,974.95 kg of cut tobacco, 6,565.15 kg of leaf tobacco, 213,257 packs of cigarettes , 17,950 individual hand-made cigarettes, 68.85 kg of flavoured hookah tobacco, 1,498.00 litres of alcoholic beverages, 69,502.00 litres of petroleum products and 289.01 kg of coffee.

During this period, 243 criminal charges were filed for illegal trade in excise products. The value of excise goods confiscated in the first six months of 2020 totalled 69,591,467.00 dinars, which is up 44.54% on the same period of 2019.

The global trend of rapidly developing modern technologies has also impacted on the growth of the grey economy related to the sale of goods and services on the basis of sales and advertising via the internet, where, among others, private individuals perform an unregistered activity to a significant extent. The Tax Police seized goods worth in excess of seven million dinars in the period from January to June 2020.

What kind of revenue collection do you expect in the period ahead, and what factors will that depend on?

– The general economic environment is the first in a series of all factors that relate to all future projections of collection, so we must keep in mind a broader picture that relates not only to Serbia, but also to the wider area of Europe and the world.

The situation that befell us at the beginning of the year is extraordinary in every respect, and to a great extent uncertain for general economic flows and consequently, of course, for work and the collection of public revenues that we administer. However, it must be stressed that in March 2020 the Tax Administration achieved a higher collection compared to the same observed period of 2014, with an index of 150.6.

Moreover, what marked the collection of public revenues during the time of the pandemic is the gross realisation of domestic VAT in the January-June 2020 period, i.e. collection on the basis of domestic VAT and domestic excise.

Thus, domestic VAT collected in the observed period amounts to 176.8 billion dinars, while in 2019 it amounted to 165.4 billion dinars, which means that the coefficient of realisation in 2020/2019 totals 106.9, while domestic excises in 2020 have been collected in the amount of 92.9 billion dinars, while in 2019 they were collected in the amount of 78.6 billion dinars, thus the coefficient of realisation in 2020/2019 is 118.2.

At the Tax Administration we are concentrated fully on providing support in the best way to all measures of the Government of the Republic of Serbia, which also include tax breaks in the part of reprogramming, methods of calculating and payments of taxes on gains, the deferral of tax obligations and contributions in the system of consolidated collection, writing-off part of interest and acts that relate to direct donations.