A Customs Shock

On February 16 the Federal Government doubled paracustoms dues on imports and "temporarily" halved the list of goods to be imported freely. The total percentage of the special import tax and special levies "for balancing the tax burden" on consumer goods from 50% on the customs basis, has risen to 83% (41.5% plus 41.5%). This category of goods includes citrus fruits, coffee, cigarettes, cosmetics, cars, household appliances, tv sets, cassette players and radio sets, clothes...When we add customs dues to these paracustoms levies, it turns out that for every dinar of imported goods we must add 1.10 dinars customs and non customs dues and in some cases republican levies, and of course sales tax.

The total rate of additional import dues on most raw materials and semi-finished goods (including petrol, oil, coal, ore, cattle, machines, turbines, tracks, etc) have been increased from 10% to 20%. The most favorable treatment has been left for medicine and raw materials for their production, which with proof that they cannot be found in the country will have a 16% tax levy, only.

The first days after the new non customs levies went into effect resulted in a wave of protests. It's not a problem that people are grumbling at the price of citrus fruits which have tripled, or the price of cigarettes which have doubled, and so on and so forth. It's more of a problem that the politically loyal Chamber of Economy has started to condemn the custom's shock measure via its officials. Momir Pavlicevic said that non customs levies had resulted in a series of strong reactions among businessmen, because it is believed that they will "slow down production and create additional pressure on prices". The always strong imports-dependent industrial lobby is not very happy with the levies and the stricter classification of goods, so that pressure on the Federal Government is bound to increase.

Three months ago, when the decision on disregarding inflation was reached, and in the defence of the dinar, proposals for a single devaluation of the dinar were rejected, as were those for a transition to a floating foreign currency rate, it became clear that the state administration would launch some customs mechanism which would change the natural, economic selection of imports to the "necessary and unnecessary" - a selection best achieved by a realistic foreign currency rate. The strength of the February customs shock tactic has shown that the foreign currency flow from the country has slowed down - it had gained momentum because all imports were profitable thanks to an overrated dinar, which was just the secondary goal of the creators of economic policy. The move seems to have been inspired by a desperate need to find income for the Yugoslav budget which had been left high and dry by Serbia and Montenegro. However, the state apparatus' insatiable hunger for competencies and arbitration in economic affairs should not be disregarded.

Kontic's cabinet noticed that customs income during January had dropped very low, to less than 5% (43 million dinars) of the total amount of collected taxes, even though the two previous years had brought in about 20% of the federal budget. This is probably the reason that the decision on the total control of imports had been eased, and the decision on increased levies was passed. Customs income dropped a lot because of a strong dinar -because customs are paid in dinars which are calculated according to the official and not the black market rate. It is a moot question to what extent this motivated importers to enter into bigger business transactions, because they didn't buy foreign currency at the official rate from the meager state reserves, but on the black market, at realistic prices. This circumstance denies the alleged argument that the price of imports goes up in order to prevent the outflow of foreign currency. If this cocktail of administrative and legal measures discourages exports, it remains to be seen with what financial mechanism the state will engage the foreign currency in the country for truly productive needs? Such a mechanism simply doesn't exist here.

Ahead of all these customs moves, National Bank (NBJ) Governor Avramovic urged the linear increase of customs duties by 33%, to the same extent to which the dinar was quietly devalued with the help of the decision on a stimulative rate which would be paid by exporters selling foreign currency to the NBJ. In this way, by refusing to undertake a serious and public devaluation, the state, through a series of indirect measures is trying to retain the buying power of its citizens (whose salaries have been frozen) and the economy which has been hemmed in with restrictive monetary measures.

Customs and Prices

The State Likes Whiskey

Last week's price increase of imports, or the filling up of the federal budget comes as no surprise, said Research Fellow with the Belgrade Institute of Economic Sciences Aleksandra Posarac, talking to VREME. When the Serbian and Montenegrin budgets for this year were being adopted, it was obvious that the sources of income were not enough to cover the projected consumption in both republics, and that money earmarked for the federal budget had been cut down. Instead of the originally foreseen 40% of income from actions, customs and other border-generated state income, the Federal budget received only 35%. In this way the Federal coffers started off with a minus of 120 million dinars or 6% of the projected budget. Since a decrease in expenditure is not the usual thing in these parts, primarily because of the high participation of military expenditures in the federal budget, the state has sought new income and found it where it would create a general rise in prices and strengthen monopolies.

This is additional evidence, said Posarac, of the lack of coordination between the federal and the republican economic policies. It is absurd that the Federal Government should formulate this year's economic policy after adopting all three budgets, it is a bad thing, in fact, that the state does not hide the fact that its consumption is untouchable - regardless of what consequences a too large budget will have on the economy and the population's standard of living. In short, the latest levies are exclusively of a fiscal nature, and the official story of additional burdens on luxury goods goes up in smoke when it becomes obvious that whiskey is not listed as a luxury good. Of course, the matter doesn't just concern the Federal Government's love of whiskey, but above all, the conjugation of interests with some importers.