Possible Reduction of Wage Tax and Contributions

After several announcements of Serbian Minister of Finance, Mr. Sinisa Mali, that the Ministry is currently working on calculations to see what is the available budget space for reduction of salary tax and contributions, BSN introduced key economic and financial organizations and the media with real levels of wage tax and contributions in the countries of Eastern and Southern Europe and Serbia.

These comparisons show that tax and contributions in Serbia are at a similar level as in Montenegro and Slovenia, and considerably higher than in all other surveyed countries. Considering that Serbian economy, especially its SME sector has average monthly income that amount to 20-22% of average monthly income of similar SME in Slovenia, the reduction on wage tax and contributions in Serbia is necessary in order to encourage growth of SME sector, employment and reduction of informal economy.

Current estimates showed that the ideal tax wedge for the development of SME sector in Serbia would be between 37 to 43 percent, which would make products of Serbian companies competitive in their placement on foreign markets.

Table 1. Total tax wedge on wages in countries of Eastern and Southern Europe