The biggest job that Serbia has to do – and it pertains to tax regulations – is to radically reform personal income tax and mandatory social insurance contributions
There is no way that the current system could be assessed as being fair. A fair/just tax system is one that burdens people who earn the same amount in the same way, while burdening those who have higher incomes with a progressively heavier burden than those with lower incomes. This is not the case in Serbia’s current system.
The root of the problem with the current solution is the difference in the taxing of income from different sources. For example, income from a salary is treated differently than income earned from copyright or capital, while as of recently we’ve also had the special (softer) treatment of the earnings of so-called freelancers. Representing a story in their own right are the various tax benefits that are determined arbitrarily, which differentiate even within individual categories of employees.
A new system of personal income taxation would have to focus on the total income that a citizen earns over the course of a year, and subject them to progressive tax rates
A new system of personal income taxation would have to focus on the total income that a citizen earns over the course of a year, and subject them to progressive tax rates, taking the taxpayer’s family circumstances into consideration much more. Similarly, the state cannot fail to include certain revenues in the contribution system to such a great extent.
There is a virtual consensus in legal theory on the essential need to reform personal income tax, with differences existing only in the details. This work was planned to be done immediately after the changes of 2000, but was deprioritised due to the introduction of value added tax, which burdened all capacities of the Tax Administration. Since then, the authorities have only occasionally addressed partial tax reforms. These reforms are sometimes conditioned by a need to make up for shortfalls in the tax system, while they are sometimes a result of the fundamentally mistaken policy of enticing investments by offering certain privileged investors tax breaks, and sometimes they are simply the result of pressure from various lobby groups, as is the case with the latest solutions for the taxation of income generated through digital platforms.
