On July 1, 2021, the Fiscal Council of Serbia published material intended for public debate entitled TWO DECADES OF PERSONAL INCOME TAX LAW – Possibilities and Needs for Systemic Reform
The published material analyzes in detail the historical development of tax systems in Europe as well as deficiency of the Personal Income Tax system in Serbia.
Therewith, guidelines for Personal Income Tax reform are given and simulations of the effects of a possible tax reform are performed.
According to the Fiscal Council’s opinion, the main deficiency of the Personal Income Tax system in Serbia are:
- Non-simple structure – a large number of different effective tax rates are not in line with a simple structure and single tax rate
- Violated the principle of tax fairness due to the wide scope of flat-rate taxation and inconsistent calculation of health contributions
- Violated tax progressiveness due to relatively low amount of non-taxable census in Serbia, as well as non-granting of benefits for dependent family members
The conclusion of the Fiscal Council is that the two-decade-old Personal Income Tax Law has expired.
They are of the opinion that eliminating tax inconsistencies and injustices that burden the current system and establishing a more progressive structure of the tax system would achieve positive effects on tax morale in society and strengthen efforts to combat the informal economy, as well as positive effects on economic growth and stability by reducing inequality in society. .
Please find the whole analysis on the link.