Serbian authorities and the IMF have achieved an agreement on a credit stand-by arrangement of some three billion euros lasting until April 2011. In the course of three weeks the Government has to adopt the budget rebalance and after that realised will be the so-called "temporary" six percent compensation on salaries, pensions, fees, royalties, dividends and other incomes while the untaxed part of earnings has been increased from the current 6,000 to 12,000 dinars.
For the salary of, say, 50,000 the budget help will be 2,240 dinars. Usual current income rate in Serbia is 12 percent and is considered high in comparison with other countries. However, even those countries having low income tax rates have not thought of an idea of charging incomes in order to get out of crisis.
With such measures also came confession made by the Prime Minister, Finance Minister and Minister of Economy that Serbia would get into recession this year. Public will hardly get an explanation to what has happened with the projected growth of 3.5 percent that was being promised until just a couple of days ago.
The hole in the budget is explained by "decreased incomes" the Government plans to compensate in two ways. First: two thirds of this sum, i.e., 67 billion will be "savings," and the remaining 34 billion would come from the revenues increase. Te "savings" mean the wages freeze until October 2010, new placements ban in public sector but not cutbacks in the bulkiest government administration in the region. Further, transfer reduction to already poverty stricken communities and the Fund for Health Care.
The Government has also thought of taking not only 50 percent of the pubic enterprises earnings, as usual, but their whole profits. There is also possibility of increasing the real estate and luxury cars taxes. Nevertheless, the biggest "help" will be from the new income tax.
The shock citizens found themselves in, the representative of the ruling party in the Parliament Nada Kolundzija has explained in comforting words saying, "Those with 12,000 dinars income will have imperceptible tax while the richest will pay the highest one." It is obvious that the MP does not understand 200 dinars are as big as a house for those living on 12,000 dinars a month.
Former crisis measures in Serbia have mainly been related to subsidised loans. In fact, in exchange for giving favourable credits the state has obliged itself to reimburse the banks operating in Serbia the difference to commercial price of credit.
This measure biggest objection is the fact banks themselves decide upon who to give credit to and therefore that money cannot necessarily help the economy. According to the same method, the state has made the Fiat car "Punto" purchasing possible in order to make this company realise the agreement it signed with the state last year.
The Union of the Employers has stated that new tax impositions would have great consequences to employment. Certainly, employers not being ready to bear the burden will transfer it to workers. Therefore, there will be more and more unemployed on the labour market. It should be noted that the richest citizens of Serbia - several hundreds of them - are regarded as unemployed and their incomes worth millions will not be subject to the new tax system.
Economists are unique - such measures would not recover the economy; they will bring it to the final collapse. Therefore, no solution the Government had had before the final agreement was appropriate for the crisis overcoming.
The second idea was giving away the solidarity dinar that would have been determined according to salaries (those earning more than 50,000 would give 300 and 600 dinars for salaries bigger than 100,000). This tax, again, would burden the middle class - accepting often several jobs - and the only one that is economising.
Such disincentive of employees only Polish authorities have come up with but their workers were on the streets a day after the announcement on incomes freeze had been made public. Protests were also organised in Bulgaria and Ukraine, although at the beginning of March the European Union has approved 500 million euros aid package for the Bulgarian economy.
Until now, the EU members have dedicated 200 billion euros to economy stimulus. The same amount has been spent for social aid programmes and banks have been given 2,500 billion euros guarantees. Every aid given until now by the EU states or institutions to various companies was accompanied by precise conditions such as maintaining the same number of employees.
Ukraine and Croatia with their claims for the Union will not have the same treatment since the taps have been turned off for the future members. However, unlike Serbia, Croatia has opted for different sort of saving. It has reduced for ten percent salaries of public services employees, cut by half the budget deficit, launched solid system reform and has been largely planning to put its securities on the international market.
In Serbia, one thing is certain - 30,000 civil servants will remain employed and they will cost taxpayers more than 250 million euros yearly. This number does not include some 40,000 employed in police and the BIA (Serbian Intelligence Agency) as well as thousands of employed in public enterprises that get state aid out of the Republic budget after no criteria.
Announced savings measures, including phone bills and the use of official cars decrease, compared with this number are ridiculous.
As if the Serbian ministers are comforted by the fact that other, i.e., most world countries are also in recession and therefore are not worried we will join them soon or we may already have. It seems that their each step is wrong and although explained by crisis, according to some estimation, it pushes the state deeper into the collapse. Many have wondered whether the authorities realise the deeper the state`s hand is in the citizens` pockets the bigger the neediness is, the more unnecessary the production becomes and the more useless the state is.
For ordinary people the worst is that in the months to come the new tax will be nothing comparing to expected inflation, unemployment and other pressures. As for the state, unfortunately, none of these measures will help in overcoming the crisis and economy survival. It will be just patching of the budget holes and surviving.
* Dragana Peric is a journalist with NIN weekly. (Photo: European Communities, 2009) CEV Magazine is an online publication of the Centre for European Values. 
