ECONOMY

Serbia introduces VAT

BELGRADE (AFP) – Serbia introduced value-added tax (VAT) on January 1 on all goods and services in the country in a move which has taken three years of preparation. The general rate of VAT was set at 18 percent, with a reduced rate of 8 percent applied to basic foods, pharmaceuticals, public utilities, publishers and certain services under a plan drawn up by the Finance Ministry and adopted by Parliament in July. The Taxation Bureau has recommended that businesses take stock to facilitate assessment of the tax. «The tax will top up the state budget and better meet the needs of the public without any general fluctuation in prices,» bureau director Vladimir Ilic told B92 radio. Ilic said that it was expected that some prices might even fall «because the majority of products now taxed at 20 percent will now be taxed at 18.» Experts from the Institute for Market Research have warned that there will inevitably be a small increase in prices in January with the introduction of VAT. «Many traders have already included the 18 percent tax in their prices… seeing the tax as a way to increase prices,» said Vladana Hamovic of the institute. Introduction of VAT was one of the key conditions set by international financial institutions to revive Serbia-Montenegro’s economy, ruined during years of economic sanctions imposed for Belgrade’s role in a series of Balkans wars in the 1990s. Serbia’s partner in the union, Montenegro, introduced VAT in April 2003.