State takes away 55% of the employee’s monthly salary

As a part of a broad research of the Southeast Europe region, Business Support Network analyzed the total burden of an average employee in Serbia with taxes, charges and other levies and what is left of an average gross salary for spending.

The research was based on the official information of the Statistical Office that the average net salary in September 2014 was 370 EUR. Considering the salary tax and compulsory social security contributions, the total gross salary of the employee (counting net wage and taxes and contributions by the employee and the employer) during this month was 600 EUR. This amount, earned by the employee, was taken as the starting point.

After deducting the wage taxes, the average montly expenses for the value-added tax (VAT) were calculated for purchase of the basic foodstuffs, technical goods, clothing and various services in legally registered shops or companies providing services.

The list also encompassed VAT on communal services, mobile and fixed telephony, electric energy, gas, etc.

Furthermore, the financial costs of various administrative taxes, fees for renewing various documents and other central- and local-level bureacratic procedures were calculated on a monthly level.

Additionally, average property tax for real estate was calculated on a per month basis.

Finally, average expenses for excise tax for the comsumption of these types of goods (coffee, liquors, ciggarettes, fuels…) was taken into account. In this way, the calculation was made on how much the state system in Republic of Serbia costs each employed citizen on a monthly basis.

^{Note: The calculation was done in Serbian Dinars (RSD). Amounts in EUR are given for reference purposes and are not part of the analysis.}

The analysis showed that the state takes away 54.87% of the average employed citizen’s salary. In other words, such an employee can count on only 45.13% of his earnings.

These results show that the fees are too high for a poor country such as Serbia, which makes it especially difficult for young employed people to form families and raise children. Instead of a system that supports employees and families, like in the EU countries (where parents gain tax benefits depending on the number of children in the household), this taxation policy is destimulating and forces young people to leave the country. The result of such policy is 2 million less people then in 1981.

The cause of such a high taxation of employees in Serbia is unreformed public sector and government administration, that have bloated up to twice the size of an average in much wealthier EU countries. Government is forced to obtain income from employed citizens to finance the bloated bureaucracy, and the political elite does not have clear programs of how to gradually transfer surplus workforce from the public into private sector. Instead, the political party that gains power employs its sympathizers in the public sector and places additional burden on the national economy and the whole society.

Reform of the tax system and financial unburdening of the employes and entrepreneurs is the only way for a long-term sustainable growth. Looking at the average population age, Serbia is among the five „oldest” countries in the world, and in addition, has almost 52% unemployment rate among the youth. If the tax system reform does not create an opportunity for increased employment of the young people, large number will continue leaving Serbia, which leads to biological dying out of the nation, loss of territories and increase in poverty.