ECONOMY

Serbia’s corporate tax at Europe-low of 10 pct

BELGRADE (Reuters) – Serbia announced plans yesterday to cut corporate income tax to 10 percent from 14 percent as the conservative-led government struggles to woo investment in manufacturing to boost growth and create jobs. Four years after the fall of Slobodan Milosevic, economic growth has been weak, but it is expected to pick up to between 5.0 and 6.0 percent this year. Unemployment stands at 34 percent and foreign investment has arrived mainly through privatization. Finance Minister Mladjan Dinkic, outlining a plan due to be presented to Parliament in June, said he believed the tax cut would boost competitiveness and encourage greenfield investment. «The new corporate income tax – the lowest in Europe – should make Serbia more appealing to investors,» he told a news conference. Dinkic said one reason for the lower tax was to encourage companies to report profits accurately. Local businesses have frequently adjusted profit reports to avoid high taxation. «The other intention was to attract non-residents to invest in manufacturing sectors,» Dinkic said. The ministry plans to offer special incentives to businesses investing in leather and textile production, agriculture, car and metal-processing industries, recycling and the film industry. Early in March, Dinkic said the government would instantly abolish the capital gains tax to get more foreign investment, but his ministry has not yet made a move in that direction. Corporate income tax makes a small contribution to state revenue, accounting for no more than 0.5-0.6 percent of gross domestic product (GDP). Personal income tax, the main source of budget revenue, accounts for around 5.0 percent of GDP, which was estimated at $20 billion in 2003.