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TAX RELIEF ON EMPLOYEE EARNINGS IN SERBIA

MORE MONEY IN WORKERS’ POCKETS




Belgrade, January 21, 2007
The tax on employee earnings has been reduced in accordance with the Law on Amendments to the Law on Citizens’ Income Tax, which came into force on January 1, 2007, i.e. by determining a fixed untaxed amount of a part of earnings and reducing tax rate to taxable amount from 14% to 12%...

Let’s remind employees that a part of gross earnings was tax free even before 2001. This tax exemption has been introduced again by the latest amendments to the Law, now in the amount of Din. 5.000,00.

When the new Law is applied, concerning payment of net earnings in the amount of Din. 100,00, it will be necessary to set aside Din. 62,7 on the average, for the taxes and contributions from earnings and on the same, and one should have set aside Din. 73,1 on that amount of net earnings, for dues, previously.

This is how the effects of the amendments to the Law appear in practice. Pursuant to the old Law, an employer used to pay the tax in the amount of Din. 2.100,00 on gross earnings amounting to Din. 15.000,00, and by the new Law, he pays the amount of Din. 1.200,00 on the same amount of salary.

The tax on gross earnings amounting to Din. 20.000 was Din. 2.800, and by the new Law, it is Din. 1.800. The tax on gross earnings amounting to Din. 25.000 was Din. 3.500, and by the new Law, it is Din. 2.400. The tax on gross earnings amounting to Din. 40.000 was Din. 5.600, and by the new Law, it is Din. 4.200. It is not hard to draw a conclusion that a significant portion of funds is released by tax reduction, what can lead either to an increase of net earnings (what would be a strict application of the Law) or a decent sum of money will be at employers’ disposal.

Regarding that the word is about the funds being an integral part of gross earnings, the trade union’s starting point should be that the effects of tax reduction turn into an increase of net earnings, what seems as the best solution for a short term. On the other hand, considering the legislator’s intentions to relieve employers by reducing the taxes on earnings and stimulating investments, opening vacancies, improving working conditions, the trade unions could support an option in which this change would not be reflected in net earnings, provided that this really led to an increase of investments, keeping jobs or increasing vacancies, improving safety and industrial hygiene.

In any case, trade unions must not be passive observers but active participants in making a decision on the mode of allocation of resources from the reduction of citizens’ income tax. The state has finished its part of the job, so we and employers should decide on how to use the funds renounced by the state in the best possible way, considering the interests of both sides, as short-term so also long-term effects.

 
     
 
 
 
 
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