НЕЈЕДНАКОСТ У СРБИЈИ – ДА ЛИ ЈЕ ПРОБЛЕМ У ПОРЕСКОМ СИСТЕМУ?
INEQUALITY IN SERBIA – IS IT CAUSED BY THE TAX SYSTEM?

Summary/Abstract: Eurostat SILC data shows that income inequality in Serbia is among the highest in Europe. The Gini coefficient, which stood at 35.6% in Serbia in 2018, was 4.8 pp higher than the EU average and 14.7 pp higher than the lowest Gini value recorded in Slovakia. This article analyses possible causes of high income inequality since credible identification of inequality drivers is a crucial precondition for adopting proper remedies. Some authors in the literature (Arandarenko, 2018; Krstić and Žarković Rakić, 2017) suggest that high inequality is caused by inadequate social and tax policies. To the contrary, our article argues that such conclusions are based on incomplete analysis and that the tax system cannot be a dominant driver of high inequality in Serbia. It is instructive to note that both Serbia, a country with high inequality, and Slovakia with the lowest level of income inequality in Europe feature similar tax system characterized by the absence of progressive tax rates on personal income, the so called flat tax systems. Thus, in order to analyse the effects on inequality reduction, we simulate a hypothetical replacement of the Serbian system of taxes and contributions on wages with the Slovakian one. Slovakian system would reduce income inequality in Serbia by 1.6 pp due to higher personal allowance, generous tax credits for dependent household members and progressive structure of health insurance contributions. The results of our simulation indicate that a potential tax reform in line with the Slovakian system would be welcomed from the standpoint of reducing inequality. However, the implied reduction in inequality of 1.6 pp is modest relative to the existing inequality gap with Slovakia and other EU member states, which suggests that the existing tax system cannot be a dominant cause of high income inequality in Serbia.

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