The average net salary in Serbia is again higher than in Montenegro, after two and a half years of the opposite situation, and for May it is 856 euros, while in Montenegro it was 832 euros for the same month.
The total percentage of burden on earnings in Serbia is 45 percent of the gross amount, while in Montenegro it is about 31 percent, which is why this "overtaking" in the amount of net earnings is more significant.
Before the "Europe Now 1" tax reform program in December 2021, the average net salary in Serbia was 637, and in Montenegro 537. Already in January 2022, after the health insurance contribution was abolished in Montenegro, a non-taxable part of the salary up to 720 euros gross was introduced and the minimum salary was increased to 450 euros, the statistical average net salary will increase to 686 euros, while in Serbia for that month's earnings were 606 euros.
That is, then the average salary increased because the state reduced the burden on wages, and not because of a significant growth of the economy or economic productivity. Most of the growth in earnings since then has been eaten up by inflation, because the cumulative impact of the annual average inflation rate for 2022, 2023 and six months of this year is 28,6 percent, while the total growth percentage of food prices alone is 38,8 percent.
Since then, the average net salary in Montenegro has been increasing thanks to changes in several collective agreements for the public administration sector, where every fourth employee works, and which significantly increased their salaries. There was also an increase in wages in a significant number of state-owned enterprises with thousands of employees, which significantly affects the growth of the average.
In the private sector, there has been no significant increase in wages in the last two years, except for trade and hospitality, where there is a large labor shortage, which is why employers had to attract workers with higher wages. The Union of Employers pointed out that the increase in employment in the public administration and state enterprises, as well as the increase in their wages, is a silent business barrier because it draws away workers whose salaries must be earned on the market.
In Serbia, from December 2021 to May of this year, the average net salary increased from 637 to 856 euros, or by 34 percent, without a significant reduction in payroll taxes. The non-taxable part of the salary was increased from 156 to 213 euros, while the contribution for pension insurance is 24 percent, and for health insurance 10,3 percent. Income tax in Serbia is 10 percent.
The total percentage of burden on earnings in Serbia is 45 percent of the gross amount, while in Montenegro it is about 31 percent due to the abolition of health insurance contributions and the high amount of tax-free earnings.
Now, in order to fulfill the promise of increasing the average net income to 1.000 euros, within 12 months after it was elected, the Government of Montenegro foresees a reduction of contributions for pension insurance from 20,5 percent in the draft fiscal strategy. This would increase the net salary of the employees by about six percent, which is 50 euros on the current average salary of 832, while the employer would save about 55 euros per worker with an average salary due to lower benefits.
The pension and disability insurance fund, of which this contribution is the original income, would thus be left without around 280 million euros. The Government's forecast is that due to the increase in the minimum wage for those with secondary education and employees with lower qualifications to 600 euros and for employees with a university degree to 800 euros, due to the growth of the tax base, they will receive 100 million euros, so the deficit in the treasury will decrease from 280 to 180 million euros.
With a series of other measures, such as the increase of the value added tax (VAT) from seven to 15 percent for a greater number of products and services, the introduction of excise taxes on wines, the collection of the full amount of VAT on the entire value of online purchases and the receipt of postal items, measures to reduce the gray economy and others... The government plans to raise revenue for the remaining 180 million euros lost due to the reduction in contributions.
The total measures of increasing the minimum wage from 450 to 600 or 800, as well as the conversion of part of the gross earnings (half of the pension insurance contribution) into net earnings, statistically reach the November average net earnings of the promised 1.000 euros.
Most of the earnings growth in the past two and a half years was eaten up by inflation, because the cumulative impact of the annual average rate of Monstat's inflation rate for 2022, 2023 and six months of this year is 28,6 percent, while the total growth percentage of food prices alone is 38,8 percent.
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