Individual Corruption

According to CMI Corruption in Serbia 2007, tax evasion is common among Serbian citizens even though tax revenues rose significantly in 2006. Reportedly, taxpayers in Serbia rarely see a connection between the taxes they pay and the social services they should be receiving from these taxes.

Of the households surveyed in the Transparency International Global Corruption Barometer 2010 only a few percent report to have paid a bribe to the tax revenue services within the precedent year.

Business Corruption

Companies should note that irregularities exist in the tax regime, particularly the disproportionately high penalties imposed on companies even over minor offences. For example, if a business is unable to immediately provide certain certificates, it can be punished with immediate closure, and there are substantial difficulties associated with re-opening later. However, according to Global Integrity 2009, bribery and unfair application of the tax regulations are now less common than they used to be. An increase in staff training has improved the administrative performance of tax administration in Serbia.

Political Corruption

In 2005, the Serbian government introduced a Valued Added Tax (VAT) of 18%, but according to a 2006 paper by Judy Baker, University of Southern California, the government has enforced the VAT on small private interests while being careful not to go after mafia affiliated companies. Moreover, it is reported in the US Embassy International Narcotics Control Strategy 2007 that Serbia's Tax Administration lacks the audit and investigative capacity or resources to investigate the cases of suspicious transactions forwarded by the Financial Intelligence Unit.

The former head of Serbia's leading mobile communications company Mobtel, Bogoljub Karic, has been accused of using so-called 'connected companies' run by his daughters to manipulate Mobtel's earnings reports in order to avoid paying taxes. In December 2005, Mobtel lost its mobile operator licence, which was followed by a police raid of Mobtel premises. Karic himself was interrogated by the tax authority in February 2006 and fled the country soon after. Forty-six criminal charges were brought against 19 people, including Karic and 3 of his brothers, for tax evasion amounting to EUR 115 million (see 'Licences, Infrastructure and Public Utilities' in the Corruption Levels section). Some observers view the charges as politically motivated because Karic had become more politically active and popular and held ambitions of becoming Prime Minister.

Frequency

The World Bank & IFC: Doing Business 2011:
- A medium-sized company makes an average of 66 payments and spends 279 hours managing the administrative burden of paying taxes at a total tax rate of 34% of profits.

Transparency International: Global Corruption Barometer 2010:
- 3% of households who had contact with tax revenue services throughout 2009 report to have paid a bribe.

EBRD & World Bank: BEEPS Serbia 2008:
- 54% of the companies surveyed report that tax rates are a problem for doing business in Serbia.

- 30% of companies consider the tax administration to be a problem.

- 9% of the companies surveyed said that bribery is frequent in dealing with taxes and tax collection.

CMI: Corruption in Serbia 2007:
- Annual losses to the state budget to due tax evasion were estimated at around EUR 1 billion, almost half the value of foreign direct investment in Serbia in 2006.