Siniša Mali, interview for CORD magazine
The goals of the Ministry of Finance are to further maintain fisical stability and eliminate systemic obstacles to economic growth. In the process of creating measures that will ease the operations of companies, the Ministry is particulary reliant on useful suggestions from the economy and the business community
The priority of the Ministry of Finance in the period ahead is to preserve fiscal stability, and to do so with the support of initiatives that should encourage growth, such as increasing public investments and reducing the tax burden, says Finance Minister Siniša Mali.
From the perspective of fiscal policy, these are also pillars of the recently approved arrangment with the International Monetary Fund.
When it comes to maintaining fical stability, says Mali, we must talk about salaries and pensions. „Measures of temporary reducing pensions will be abolished, and we can expect an increase in pensions by year’s end. As you know we also expect an increase in public sector wages. There is room for increasing salaries and pensions, but this increase must be ar a sustainable level“, says our interlocutor.
The medium-term orientation of fisical policy is to maintain a low deficit, further reduce public debt and use fiscal space with the aim of supporting economic growth.
Fiscal relaxation measures will work on two tracks, explains Serbia’s finance minister. „By unburdening the economy, primarily through reducing the tax burden on labour, growth and job creation are encouraged. On the other hand, fiscal space has allowed for a greater allocation of funds for public infrastructure. In order to improve quality and quantity of public infrastructure in the best possible way, we are workig to further improve the public investment management system“, explains Minister Mali.
How will you address the problem of an insufficient share of public investmment in GDP and insufficiently effective management of large instrastructure projects?
Considering that we created space for financing new projects in the previous period, with the conducting of fiscal consolidation, today we have funds required for capital investments. In this sense, the competent institutions are taking the necessaryy steps to increase the level of public investment, bozh in road and rail infrastructure, as well as in health and education, local communal infrastructure etc.
Certain steps have already been taken. All capital projects, irespetive of sources of funding, have been included in the budget since 2017, while in mid 2017 we also adopted the Decree on contetn, the preparation and evalutation method, as well as the monitoring of implementation and reporting on the implementation of capital projects. The Law on the Planning System has also been adopted, which establishes a national framework for planning. In order to for us to eliminate structural weaknesses in implementation, in the period ahead we expect to adopt detiled rules on proposing and selecting projects and to establish the practice of publishing summaries of feasibility studies for major infrastructure projects. We will also establish the Capital Investment Commission. All this will help us to implemetn large infrastrucuture projects quickly and efficiently, which is crucial to the development of the country.
What changes to the tax system do you antiipate that could stimulate the economy?
We are planning a series of measures in the period ahead with which we will improve the rights of taxpayers, as well as specific measures for encouraging economic activity. Using the available fiscal space, we will consider tax policy changes in order to provide support for economic growth through an effective, balanced and efficient tax system.
In that sense, I would especially like to point out that we are planning to reduce deadline for refunding VAT, with which we will improve the liquidity of the economy. The legal deadline for VAT refunds in 45 days, but we consider that there’s no reason for business people to receive that money as soon as possible.
In the following period, we are also planning to reduce fiscal burden on income, as well to adopt a special package of tax incentives for innovative activities. We also plan to modernize certain solutions regarding the taxation of companies’ profits, especially with regard to calculating tax depreciation.
Moreover, plans also include the regulation of a sspecial taxation regime for the income of citizens who provide hospitality services in domestic work and rural tourism household, as well as the abolition of tax legislation provisions that unnecessarily discourage taxpayers or create unjustified administrative difficulties for them.
As you can see, we are planning an entire arrayof measures that will stimulate the economy and ease the operations of businesses. Of course, in the tangible adoption of these measures, we will ensure that their implementation does not jeopardise the results achieved to date in terms of fiscal consolidation.
Which measures in the tax policy domain do you consider as being the most effectivee for reducing the share of the grey economy in the fields of labour and employment?
Reducing the fiscal burden on earning certainly discourages the grey ecnomy. Likewise, all measures that incease the efficiency of taxpayer control will certainly have a positive impact on the suppression of the grey economy. In this regard with other mesures that improve the capacity of Tax Administration in relation to the implementation of efficient tax controlm i would single out in particular activities on amendments to the Law on Fiscal Cash Registers, which implies the use of modern tehnical solutions, that enavle the monitoring of taxpayers to simplify the administering of their obligations, whilist enabling the Tax Administration to carry out tax auditis in an optimal way.
In this contest, what changes are you planning in the functioning of the Tac Administration?
Changes will occur at several different levels. We’ve formed a working group that will deal specifically with the transformation and modernization of the Tax Administration, and which will meet once a week. This is one of our top priorities, and I will personally deal with all aspects of this transformation.
Tax administration must be sustainable and efficient, and we want to create a system that will be able to function well during the decades ahead of us. Previous years have already seen some tangible results achieved, such that the number of organizational units has been reduced from 178 to 78, all tax returns can be completed in electronic form, and a service provider sector for taxpayers has been established. However, there is still lots of work to be done to further reduce the number of organizational units, upgrade existing software solutions and integrate them. We will continue doing this until we create a good, efficient and sustainable system.
What measures do you see as the most efficient when it comes to reducing ambiguity in the interpretation of regulations, especially in the work of the Finance Ministry and the Tax Administration?
I don’t consider that there are significant differences in the degree of uncertainty in the interpretation or application of tax regulations compared to other regulations. However, this doesn’t influence the necessity to take measures aimed at improving transparency in the application of tax regulations.
This can basically be achieved through the identifying of unclear solutions in tax regulations and their precise defining or removal. In this respect, it is particularly important that we interact with taxpayers for whom such regulations cause practical problems, so the initiatives and opinions we receive form them are invaluable to us. Of course, as is to be expected, the business community is most active in this context.
We are also working to further improve cooperation between the Tax Administration, which is authorized to directly control taxpayers and sectors within the Ministry of Finance that are responsible for giving opinions on the application of tax regulations and the conducting the second instance procedures. The cooperation already functions well, but I consider that there’s always room for further improvement, especially in the context of planned activities on the reform of the Tax Administration.
How far have you progressed on preparing the final list of parafiscal charges?
Work on the drafting of this law is nearing completion, so we expect the final text soon. I believe this represents a big step forward in terms of the transparency of changes that burden the economy.
In the context of changing policies towards the creation of an incentivising environment for doing business, how do you view cooperation with the business community to identify optimal solutions?
Cooperation with the business community is very important and we are working to intensively to improve it further. We listen to the needs of the economy and the business community every day, in order to ease their operations. In that sense, it is certainly also important that we plan to introduce a package of incentive measures, such as reducing the deadline for VAT refunds, reducing the fiscal burden on earnings, encouraging business start-ups etc.
I would also like to mention that the business community is very active with its proposals and comments at all stages of preparing new regulations, as well as amendments to existing legislation.
How much can dialogue models, such as the „Dialogue for Change“ and the FIC White Book, contibute to the formulaton of solutions that are efective and feasible?
Communication between the business community and the public authorities under the auspices of the „Dialogue for Change“ and the Working Group for the White Book, is invaluable for improving the normative framework relevant to the economy. This cooperation has already resulted in positive progress in the past, in terms of improving the tax system in Serbia, but I consider that the most significant results are yet to come.