IMF suggests Serbia raise VAT and retirement age

The International Monetary Fund (IMF) will suggest the next Serbian government raise the value added tax (VAT) and reform the pension system, the Blic daily reported Saturday.

The newspaper states it gained access to IMF's recommendations after its mission had returned from Belgrade to Washington, adding that they included suggestions to raise the VAT, reduce the mass of salaries paid from the national budget, increase the number of tax payers and lower subsidies.

The IMF will come to Serbia once the next government is formed, but it requires an agreement on three points in order to continue its arrangement with Serbia, the article states, listing a 2012 budget revision, short-term program to reduce the national debt and faster structural reforms as the three points.

According to Blic, the IMF wants the new government to consider a tax reform that would reduce the income and profit taxes, while raising the property tax and VAT.

This would cut down the budget deficit, improve the competitiveness of the export sector, stimulate employment and reduce the grey economy, Blic states.

The reform is necessary to secure a more efficient, fair and sustainable pension system, the IMF explains.

The mission points out that this pension system would give Serbia two options, to reduce pensions or raise the statutory retirement age and increase the number of workers.

The second option is preferable because otherwise the government would have to reduce pensions to a socially unacceptable level, Blic quotes the IMF as saying.