Public finance in Serbia: What can companies expect?

Abstract

Companies expect low taxes, adequate budgetary support and contribution to the stability of fiscal and financial system from the public sector. The current public finance performs none of the three tasks in an adequate manner. First, public consumption in Serbia is high and inappropriate. The quality of service, which the public sector provides the economy with, is not satisfactory. Second, the structure of public expenditures is unfavorable. Current expenditures, and salaries and pensions within these, have an advantage, while, on the other hand, a sharp reduction in capital expenditures is implemented and further projected, as well as reduction in subsidies and government loans, and in the purchases of goods and services from the budget. Third, public finance does not improve financial stability. The state is a strong competitor to companies in the financial market, and both the legal and the economic limits of the public debt are reached. As part of the required public sector reform, it will be necessary first for the state to seriously demonstrate to the economy that, through the reforms of health, education, public administration, public companies and pension system, as well as through regulation of business environment and grey economy, the conditions and costs of business operations will be more favorable in future. Then, the tax reform would also be easily accepted by the economy and by the citizens.