Belgrade: Serbia's parliament approved income tax changes on Friday aimed at curbing evasion and boosting employment, and ratified a loan from the UAE to back its budget.
The amendments will entitle employers to a refund of tax they pay on workers' wages, ranging between 65 per cent and 75 per cent, depending on the number of new jobs they create.
To cut unemployment of about 20 per cent, Serbia is trying to make its economy more attractive to investors, clarify laws on taxation and labour and cut down on the unofficial transactions, evading tax, and on the unregistered labour and trade that account for an estimated 30 per cent of gross domestic product.
Earlier this week, Finance Minister Lazar Krstic said the tax relief should encourage employers to formally hire people who are working illegally, before the government cracks down.
"I am certain that the tax relief will increase the employment rate," Krstic told lawmakers.
The parliament ratified a $1 billion (Dh3.67 billion), 10-year loan from the UAE at an interest rate of two per cent, for budget backing.
Serbia's 2014 budget assumes borrowing of €3 billion (Dh15 billion) from the UAE. Krstic said there would be a second $1 billion instalment later this year.
Belgrade is also seeking a $1.5 billion precautionary loan deal with the International Monetary Fund, but the lender said that talks are not expected to resume until the autumn, after the government sets its economic agenda and assesses the economic cost of floods that killed 51 people.
The European Bank For Reconstruction and Development on Thursday said the initial damage estimate was about seven per cent of the GDP.