Download fiscal reforms from 2001 to 2005

MINISTRY OF FINANCE
www.mfin.sr.gov.yu
FISCAL MEASURES AIMED TO
INCREASE EMPLOYMENT,
SOCIAL SECURITY AND
POVERTY REDUCTION
May 2005
Jelena Rančić
GOVERNMENT OF THE REPUBLIC OF SERBIA
MINISTRY OF FINANCE
Contents:
• Macroeconomic indicators
• Fiscal reforms and stable fiscal policy:
decrease of fiscal burden (income tax)
- change of public expenditure structure
- public debt reduction
GOVERNMENT OF THE REPUBLIC OF SERBIA
МИНИСТАРСТВО
MINISTRY OF FINANCE
ФИНАНСИЈА
IN RESPECT OF POVERTY REDUCTION STRATEGY, THE
KEY OBJECTIVES FOR MINISTRY OF FINANCE ARE :
• Sustainable economic growth
• Macroeconomic stability
• Fiscal reforms continuance and stable fiscal policy
ACCOMPLISHMENT OF THESE OBJECTIVES IS A
PRECONDITION FOR:
• Unemployment reduction
• Improving quality and quantity of social protection services
• Health care special programs (primary and preventive health
care)
• Implementing educational reform in line with the requirements
of the market economy and the development of private sector
(especially SME)
MINISTRY OF FINANCE
Real GDP growth rate: 2001 - 2005
9.0
6.0
8.0
5.5
4.6
4.0
3.0
3.0
0.0
2001
2002
2003
2004
2005
МИНИСТАРСТВО
MINISTRY OF FINANCE
ФИНАНСИЈА
Inflation rate: 2001 - 2005
45.0
40.0
35.0
40.7
30.0
25.0
20.0
14.8
13.7
15.0
9.7
7.8
10.0
5.0
0.0
2001
2002
2003
2004
2005
GOVERNMENT OF THE REPUBLIC OF SERBIA
MINISTRY OF FINANCE
GDP per capita: 2001 - 2005
4,000
3,396
2,957
in US dollars
3,000
2,542
1,909
2,000
1,414
1,000
2001
2002
2003
2004
2005
GOVERNMENT OF THE REPUBLIC OF SERBIA
MINISTRY OF FINANCE
FISCAL REFORMS FROM 2001 TO 2005
• Gross wages (net) taxation system was introduced with personal
income tax rate of 14% (in 2001)
• A unique minimal basis for contributions was introduced - 40%
of gross wage (previously 7 basis) from previous quarter (in 2004)
• Payroll tax by employer of 3.5% was abolished (in 2004)
• Contribution rates were changed (in 2004):
Contribution rates by employer and
employee
to 2004
from 2004
Pension fund - employees
20,6
22,0
Health insurance
11,90
12,30
Unemployment insurance
1,10
1,50
GOVERNMENT OF THE REPUBLIC OF SERBIA
MINISTRY OF FINANCE
FISCAL REFORMS FROM 2001 TO 2005
•
Employers that employ workers who lost their jobs in
restructuring process are granted certain tax relief:
- when employer hire elderly worker (from 46 to 50 years of
age) it pays only 20% of total contributions for the next two
years
- when employer hire elderly worker (more than 50 years
old), it is not obliged to pay contributions for the next two
years
•
The plan is to introduce global income tax
GOVERNMENT OF THE REPUBLIC OF SERBIA
MINISTRY OF FINANCE
Average net salary from 2001 to 2004
200
194
176
150
In Euros
152
100
91
50
0
2001
2002
2003
2004
GOVERNMENT OF THE REPUBLIC OF SERBIA
MINISTRY OF FINANCE
FISCAL REFORMS FROM 2001 TO 2005
• Corporate income tax was reduced from 20% to 14% (2003), and
then further reduced to 10% (2004)
• Law on Excises was further harmonized with the EU regulations in
terms of scope of taxation and excise amounts
• Law on customs tariff brought the reduction of average customs
rate for about 35%, and 36 custom rates were replaced by 6.
• The beginning of 2005 saw the introduction of VAT that replaced
sales tax (sales tax rate was 20% with a lot of tax exemptions),
whereby one-phase taxation of goods and services was replaced by
taxing the sales cycles in all phases
GOVERNMENT OF THE REPUBLIC OF SERBIA
MINISTRY OF FINANCE
FISCAL REFORMS FROM 2001 TO 2005
• All goods and services are taxable by VAT (with no
exemptions), and there are two rates: standard (18%) and
reduced rate (8%)
• The plan is to reduce standard rate for some goods and services
(food products –frozen fruits, vegetables, meat, fish; new
housing; tickets for cultural and sport manifestations)
GOVERNMENT OF THE REPUBLIC OF SERBIA
MINISTRY OF FINANCE
Share of sales tax/value added tax revenue in GDP from 2001 to
2005
14.0
13.6
12.0
10.0
12.0
12.3
11.5
10.2
8.0
6.0
4.0
2.0
0.0
2001
2002
2003
2004
GOVERNMENT OF THE REPUBLIC OF SERBIA
2005
MINISTRY OF FINANCE
FISCAL SUSTAINABILITY OF PUBLIC EXPENDITUIRE
• Significant reduction of current expenditure (subsidies, transfers,
wages and salaries, social grants) and increase in capital
investments
• Pension funds arrears are decreased
• Public expenditure structure changes
GOVERNMENT OF THE REPUBLIC OF SERBIA
MINISTRY OF FINANCE
Share of social security expenditure in GDP from 2001 to 2005
20
18.3
19.1
18.5
18.4
2003
2004
2005
15
14.5
10
5
0
2001
2002
GOVERNMENT OF THE REPUBLIC OF SERBIA
MINISTRY OF FINANCE
Share of expenditure for education in GDP from 2001 to 2005
5
4
3.8
4.0
3.9
3.7
3.5
3
2
1
0
2001
2002
2003
2004
2005
GOVERNMENT OF THE REPUBLIC OF SERBIA
MINISTRY OF FINANCE
Share of health expenditure in GDP from 2001 to 2005
10
8
6.9
6
6.7
6.4
6.6
5.9
4
2
0
2001
2002
2003
2004
GOVERNMENT OF THE REPUBLIC OF SERBIA
2005
MINISTRY OF FINANCE
Consolidated public revenue and expenditure from 2001 to 2005
60.0
consolidated public revenue
consolidated public expenditure
in % GDP
50.0
48.0
40.0
39.1 40.7
44.3
43.1
47.3
45.5
47.0
46.2
45.7
30.0
20.0
10.0
0.0
2001
2002
2003
2004
GOVERNMENT OF THE REPUBLIC OF SERBIA
2005
MINISTRY OF FINANCE
Fiscal and overall fiscal deficit/surplus from 2001 to 2005
3.0
fiscal deficit/surplus
2.0
overall fiscal deficit/surplus
2.0
in % GDP
1.0
0.5
0.0
2001
2002
2004 -0.1
2003
-1.0
-1.6
-1.5
-1.6
-2.0
-2.5
-3.0
-3.7
-4.0
-3.6
-4.2
-5.0
GOVERNMENT OF THE REPUBLIC OF SERBIA
2005
MINISTRY OF FINANCE
Total public debt of the Republic of Serbia - year end
120.0
in % GDP
100.0
106.6
80.0
60.0
60.0
40.0
20.0
0.0
2001
2004
GOVERNMENT OF THE REPUBLIC OF SERBIA
MINISTRY OF FINANCE
• The process of switching from line budgeting to
program budgeting is underway.
Program budgeting will facilitate determining of
accurate budget allocations directly used for
implementation of poverty reduction strategy.
Until the program budget is adopted, it is possible
to present the overall effects of introduced poverty
reduction reforms only indirectly.
• The Ministry of Finance is preparing the report
on implementation of Poverty Reduction Strategy,
with the estimate of realized funds in the period
2004-2005.
GOVERNMENT OF THE REPUBLIC OF SERBIA