NALED: Reduction of labor tax by 3% possible by 2021

According to the NALED's research, 79% of business people in Serbia believe that the excessively high labor tax is one of the key reasons why business activities are moving into the grey zone.

The NALED believes that the labor tax could be reduced by 3% by 2021, which, according to them, might bring 18,000 citizens back into legal business operations.

With the help of Germany's GIZ, the NALED has carried out an analysis and determined that the labor taxation in Serbia on the net wage level amounts to around 64.3%, says the vice president of the Fair Competition Association at the NALED, Vladimir Tisparevic. He adds that the taxation of total labor costs, the so-called “tax wedge” amounts to 39.2% in Serbia.

– When we compare this to the EU states and the surrounding countries, where it's 41.5% to 42%, we must conclude that the taxation in Serbia is not too high and that it is near the European average – Tipsarevic says. However, compared to other countries of the region, Serbia is above average in this respect.

The NALED has determined that employees are not motivated enough to report instances of grey economy and that only one in seven workers who are paid directly in cash are ready to do so. Tisparevic points out that there is no clear motivation in employees to be registered for the full wage amount or to be registered at all, as they can't relate those payments to the future pensions or health insurance.

He says that this problem has been analyzed the most through the national plan for suppressing grey economy.

– The plan is for analyses of tax inflows and outflows when it comes to these kinds of contributions to be done by the end of 2019 and 2020 and to see how much room there is, in fiscal terms, for us to secure a reduction of labor tax – Tipsarevic.

He expects the net wage taxation to drop from the current 64% to 61% by the end of 2021.

NALED Beograd

GIZ Beograd

GIZ

grey economy

NALED research

Vladimir Tipsarević

taxes

taxation

taxation in Serbia