Law on a One-Time Tax on Extra Profit

Amending Injustice Done

AIM Belgrade, June 27, 2001

If, per chance, Serbia had been a genuine state during the past decade, the Law on a one-time tax on extra profit recently adopted by the state Parliament would not have been placed on the agenda to begin with. For, in a country in which the law applies equally to all and the institutions of the system function accordingly, the very idea of sanctioning things retroactively would have been a strong enough reason for rejecting such a law at the very start. The whole thing would have been unacceptable not only from the legal point of view, but impracticable as well - no such individuals to which the law pertains would have been available. They would have been put in jail long since.

More to the point, if in the past twelve years the central bank in Serbia had not sold hard currency only to the privileged few while denying everyone else the advantage, if certain banks had not allotted favorable loans to some and to some not, if it had not been for the government and individuals within it who showered their proteges with luxurious villas and apartments while manipulating the so called solidarity daily allowances of the needy, not a single person to whom the recently adopted law applies could have been found in present-day Serbia. But, such individuals do exist because, starting with 1989, Serbia ceased being a law-upholding country: nor was the law upheld, nor did the institutions of the system function as they should have, nor were citizens entitled to equal rights. The chosen few and their kin amassed enormous fortunes overnight. The time has come for them to pay back at least a portion of the acquired wealth by merely settling what they owe in taxes they have avoided settling in the previous period.

The ambition of the law on the taxation of extra profits is not to run down the offenders or determine their possible involvement in criminal acts, but to try to administer at least a grain of justice to the, say, humble craftsman haunted by the tax-collectors for every uncollected tax-penny in the past ten or so years, restoring his equality before the law with the rights of the "successful" entrepreneur blessed with the privilege of being exempt from taxes on deals worth millions.

Is this to be the way to make up for all the wrongs done in the past twelve years? Certainly not. But, if all goes well, a tiny portion of the amazing wealth acquired merely by being close to the top of the former regime might find its way back to the people. At the moment, it is hard to determine the exact amount of money owed. It still remains to be seen how the more sensitive stage of the process, its enactment, will be carried out. It is up to the tax-office and corresponding governmental bodies to cut up a fine for all who have profited on any of the 19 grounds cited in the law: a 30 to 90 per cent tax rate on profits and property worth from DM 100 thousand to DM 10 million or more.

The government committee for investigating abuses in business and finance has identified a portion of those who have profited during the previous period by: making use of the primary or grey issue, purchasing hard currency at the official rate which was far lower than the then market-rate, taking hard currency out of the country under the guise of advance payments on fictitious invoices for services rendered and import deals, importing and distributing excise goods without paying customs duties, taxes and other fees, importing and exporting products on the quota regime, supplying the state commodity reserves or purchasing stock from it with no public bids held, misappropriating budget and public funds, misuse of solidarity daily allowances and proceeds from taxes...The list of offenders also includes: general managers of state and public companies and their managerial staffs involved in abuses of the privatization process and the embezzlement of funds of the notorious Loan for Rebuilding Serbia, persons privileged in the pay-out of foreign-exchange savings deposits in bankrupt para-state ("pyramidal") banks and all those basking in apartments and villas of over 90 square meters, if acquired while in office. Individuals lacking the means to settle the one-time tax will be obliged to mortgage their property, public firms given the opportunity to meet their obligations by selling some of their capital to the state.

The law is very strict in sanctioning all attempts to avoid prescribed obligations such as "omitting" to file tax-reports or supplying tax authorities with false facts. In such cases it calls for fines up to ten times higher than the original debt. Judging by the initial reactions of those most often mentioned for their close ties with the Milosevic family in the past decade and privileges deriving from them, it seems these people will "square their accounts concerning the one-time extra-profit tax with ease..." The wealth of the Karic brothers and the proprietor of the TV station Pink, Zeljko Mitrovic, for instance, is such that they will have no trouble paying back what they have usurped. The same, claim the well informed, holds true for most general managers of public companies, overnight-millionaires who have made their fortunes during the privatization process. The tax now levied on them is "much below their monthly gains".

It remains to be seen how some of the current opposition MPs will manage to settle the tax amounting to some DM 60 000 levied on spacious apartments acquired during their short-lived terms in office. Explanations amounting to claims that "they were only given what was due to them in light of functions performed" or that "they have made use of rights pertaining to all citizens" simply do not sound plausible. The former and acting prime ministers have things to account for too. For example, the mystery of having means to pay for luxurious villas they live in while ostensibly subsisting on salaries of DM 300 to DM 500 and even no income at all. All this does not go to say that objections heard during the parliamentary debate on the proposed bill coming from the opposition had been legitimate, especially in view of the wealth these people have amassed through privileges stemming from power or their closeness to the former regime.

There can hardly be anything more absurd than listening to the claims of the Socialists that they have nothing against the proposed law on principle - but for the fact that it does not apply to the present authorities and the grey economy sphere. In doing so, they have proved that they have not understood times have changed and that, hopefully, from now on there is to be no one exempt from sanctions for criminal offences. Their persistent requests that the new law be applied to the present authorities as well is merely a PR strategy. For, not once during the parliamentary debate could they point to anyone belonging to the former opposition with access to the primary issue, import deals, purchase of hard currency at official rates or anything similar. If they could have, would they have let such an opportunity slip by? Their requests that some of the DOS leaders explain how they got their apartments were an inversion of arguments. If not so, how come they haven't named a single DOS official with an apartment or villa worth several million DM bought for but a few thousand DM? Whatever they say, it seems the present opposition has nevertheless understood that settling debts as prescribed by the Law on extra profits does not imply amnesty for criminal offences for which, if proven, sooner or later, they will be prosecuted.

TATJANA STANKOVIC

(AIM)