Towards reforming parafiscal charges - Can Serbia outperform the region?
For over a decade, business owners in Serbia have been advocating for a solution to the problem of numerous non-tax charges, often including hidden taxes disguised as fees or levies. Similar challenges are faced by entrepreneurs in the region, and discussions on how neighboring countries are tackling this issue took place at a roundtable within the CORE Partnership network, aimed at exchanging experiences and best practices among Western Balkan countries. The solution proposed is the establishment of a unified public database of all non-tax charges paid by businesses and citizens, a cause championed for years by NALED through its Gray Book. Such a system already exists in the Republic of Srpska (BiH), which has maintained a registry of non-tax charges for over five years.
- In 2019, we established a database containing all non-tax charges collected from citizens and businesses. It's important to note that in our system, charges not found in the registry cannot be collected, meaning our system has constitutive effect. Besides listing non-tax charges, our goal was to make them transparent and then proceed with reforms, abolishment, and changes in charge amounts. We also have a Coordination Body for Analyzing the Justifiability of Parafiscal Charges, which conducts regular assessments of each charge listed in the database, explains Dalibor Tomaš, an advisor to the Prime Minister of the Republic of Srpska, adding that before the system was established, there were 610 charges, and with the implementation of the system, 19 non-tax charges were abolished.
We hope that Serbia will follow this good example, says Jelena Bojović, Program Director at NALED, recalling that a few years ago, NALED, together with KPMG and with the support of USAID, identified over 1,200 charges at the republic level alone, spread across more than 500 laws and bylaws. Among them, taxes were the most numerous, comprising three-quarters of the total number, yet they only contributed 25% to total non-tax revenue. On the other hand, an analysis of local administrative fees in a sample of 15 local self-governments showed that the average number of administrative fees locally is around 70, contributing about 0.2% to total revenue.
- Our recommendation is to mandate the electronic calculation and collection of all non-tax charges through the eGovernment portal or the ePay portal. This will establish an up-to-date list of all non-tax charges by national, local, and provincial authorities, public enterprises, local public enterprises, public agencies, etc., along with their corresponding amounts. Non-tax charges will be transparent, allowing for electronic payments without the need for proof of payment, and the state will have better insight into collected fees and charges, explains Bojović.
Participants at the roundtable also included representatives from Montenegro, which also has a database of charges established project-wise upon the initiative of international institutions. Their registry contains data on 1,800 state and local non-tax charges available in Montenegrin and English. The main drawback of the Montenegrin system is the lack of mandatory entry of non-tax charges into this registry, as it is not legally prescribed.
CORE Partnership serves as a platform for dialogue and exchange of best reform solutions for the sustainable development of the region. The partnership brings together more than 20 institutional partners from the Western Balkans and Croatia. It is supported in its work by the German Development Cooperation implemented by GIZ within the Open Regional Fund for Modernization of Municipal Services.
