Republic of Serbia: Building A Framework for Tax Expenditures Reporting

This technical assistance report responds to the Republic of Serbia’s request for a comprehensive framework to report tax expenditures across the personal income tax (PIT), corporate income tax (CIT), and value-added tax (VAT). It defines benchmark tax systems for these three major taxes, outlines methodologies for estimating associated tax expenditures, and provides preliminary results. The analysis shows that VAT-related tax expenditures represent the largest fiscal cost, followed by PIT and CIT. VAT benefits are disproportionately captured by higher-consumption households, while CIT benefits are heavily concentrated among a small number of large firms. The report recommends institutionalizing regular tax expenditure reporting, improving data governance and inter-agency coordination, and strengthening capacity for microsimulation modeling to support ongoing fiscal analysis and enhance transparency.