Tax evasion in Serbia: A key driver of economic instability
DOI: 10.5937/etp2404116LJ
Keywords:
tax, tax evasion, corruption, economy, instabilityAbstract
In the last 20 years, the Republic of Serbia has undergone drastic changes in its economy and business environment, accompanied by evolving tax legislation. Since taxes and tax evasion are inseparable processes, tax evasion has become increasingly sophisticated, while the state continues to struggle to reduce the grey economy. However, given that tax evasion and the grey economy are prevalent in neighboring and other Eastern European countries, it is unlikely that the situation will improve quickly. The focus of this paper is the analysis of tax evasion, aiming to clarify its concept, examine its causes, and study its dynamics at the global level, especially among EU-28 countries. The research also aims to examine tax evasion in Serbia and its consequences for the economic system. While the state has strengthened punitive measures for prosecuting tax evaders, the penalties have remained relatively mild. The determination of optimal tax rates may be misguided, as the increasing frequency of tax evasion suggests that the system is imbalanced. Illegal work poses a significant challenge and serves as an indicator of perceived corruption, which leads to low tax morale, weak trust in the state, and consequently, tax evasion. This undermines the free market and competition, deprives workers of their rights, and damages and burdens the state, resulting in economic instability.
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