By Igor Jovanovic
The Serbian government gave preliminary approval Thursday (March 29th) to an amendment to abolish the value added tax (VAT) and limit profit margins on baby foods and equipment — a voter-friendly issue that had stalled for years, but quickly gained momentum after parliamentary elections were announced for this spring.
The amendment eliminates the 18% VAT in what has become known as the “Battle for Babies” in Serbia.
“I believe that the VAT annulment will lead to a decrease of the costs for parents and this is the best way to help them,” Dusan Nikezic, the state secretary for finance, said at a news conference on Thursday.
Parliament Speaker Slavica Djukic Dejanovic promised the legislature would take up the matter as soon as possible.
Nearly 180,000 signed petitions were given to parliament on March 16th, and supporters believe the proposal would make infant food more affordable and help improve Serbia’s declining birthrate.
In terms of the number of children born each year, Serbia is close to the bottom among European countries. In 2011, the country had a negative population growth rate of minus 3.5%.
Parliament took up the issue this month — three days after a parliamentary election was scheduled for May 6th. Prime Minister Mirko Cvetkovic promised petitioners the government would strive “to affect the population policy through systemic measures” and abolish the VAT.
“Many parents have called us to complain about excessively expensive equipment and food for children,” Maja Tadic of the parenting website Bebac, one of the petition organisers, told SETimes.
“We realised that for many people in Serbia, the prices are an obstacle to having additional or any children at all,” she added.
The VAT is a tax on profit on a product — the difference between what an item costs to manufacture and the price for which it is sold. Collections occur every time a business in the supply chain purchases or produces a product and resells it. The VAT on baby food and equipment is 18% — much higher than the 8% VAT on flour, milk, medicines and textbooks.
Other countries in the region have also taken steps to reduce the VAT on such products. Croatia’s VAT on baby food is 10% and Macedonia’s is 5%, even though the VAT on most other products is 25% and 18%, respectively. Bosnia and Herzegovina’s VAT of 17% includes baby food and equipment.
Belgrade resident and parent Vera Tubic said that abolishing the VAT on baby products is the first step to assist parents cope in a difficult economic environment.
“I have been unemployed for years just like 700,000 other people. Imagine what it is like to raise a child on a 400-euro [monthly] salary. We are managing somehow at the moment, but what about when she grows up and starts school?” Tubic said.