Public finance reform

Project description

Title: Public finance reform in Serbia
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Republic of Serbia
Lead executing agency: Ministry of Finance of the Republic of Serbia
Overall term: 2015 to 2016

Context
Serbia is currently undertaking political and economic reforms, the goals of which are to increase the stability of the state and promote the approximation of European Union (EU) laws, in a market economy-based system. Given the precarious budgetary situation, strengthening the capacity for self-financing is a key element of Serbia’s development strategy. At the same time, the Serbian Government has recognised the importance of good governance, not only with a view to possible EU accession, but also as a step towards becoming a modern and effective state. Efforts are therefore being made to reform Serbia’s public finance system in order to meet the requirements of a modern state in terms of transparency, effectiveness, citizen orientation and accountability in line with EU standards.

Objective
Transparency, effectiveness and citizen orientation have improved in the public finance system.

Approach
Based on an approach which promotes good financial governance, the project pursues a comprehensive strategy which aims to simultaneously strengthen the state systems for income and expenditure. It supports principles of good governance – such as transparency, the rule of law, effectiveness and citizen orientation – in the Serbian public finance system. The efforts to improve the use of public income in a manner which encourages development and reduces poverty have a positive impact on the lives of Serbian people and enhance the legitimacy of state actions.

The project supports the Serbian reform agenda which provides not only for the consolidation of state finances, but also for the anchoring of the principles of good governance in the public finance system. As part of its international cooperation activities, Germany is also supporting Serbia’s efforts to meet the requirements of chapters 16 (Taxation), 32 (Financial control) and 33 (Financial and budgetary provisions) of the body of European laws known as the Community acquis in a bid to move closer to the EU. At the same time, the project is also part of the Serbian Ministry of Finance’s planned reform action plan. Following a comprehensive and systematic approach to good financial governance enables the Ministry to manage the implementation of the planned reforms. Here, particular emphasis is placed on improving the performance of the Ministry’s tax administration and budgetary controlling section and on introducing an integrated internal financial control system in line with EU standards.

The support offered by the project includes international and national short-term and long-term advisory services as well as basic office equipment.

Results
In the previous project of the same name, which ran from 2012 to 2014, the following results were achieved:

The performance of the Serbian tax administration in exercising its core functions and in managing reform processes improved. A modernisation plan was developed and a department set up to manage reforms and coordinate internal and external projects.

The preconditions were met for establishing a management information system to underpin the effective and efficient management of the tax administration. A glossary was created that contains more than 220 everyday terms from the field of tax administration. This will provide the basis for the reporting system and the development of performance indicators.

The taxpayers’ knowledge and their awareness about their rights and duties was enhanced (taxpayer education). An informative weekly television broadcast provides information on tax issues. Since 2012, a regular tax forum has been held involving taxpayers and representatives of the administration. This demonstrates the administration’s increased citizen orientation.

The Ministry of Finance’s budget inspection department is involved in the entire process of public finance management. An overarching strategy was developed to strengthen the department, as was a method to ensure a consistent approach is taken. Reform activities for the next three years were set out in an operational plan.

Contact

Birger Nerré
birger.nerre@giz.de