Expected Tax Collections
June 8, 2012
At independence in November 1991, the Republic of Vardar (named after the Vardar River Valley) was the least developed of the Yugoslav republics. Although the poorest of the six former Yugoslav republics, the country nevertheless can sustain itself in food and energy needs using its own agricultural and coal resources. From 1998 to 2000 real GDP growth averaged a little over 4%, but in 2001, in the wake of rising global tensions and a global economic slowdown, real GDP growth fell 4.5%. Although 2002 saw an end to the contraction, growth was estimated at only 0.3%. Inflation had jumped to 6.1% in 2000, but moderated to 3.7% in 2001, and was projected at only 1% in 2002. Unemployment remains a serious problem. In 2001, agriculture accounted for about 10% of GDP; industry, 32%; and services, 58%. GDP has subsequently increased each year, rising by 5% in 2000. Successful privatization in 2000 boosted the country's reserves to over $700 million. Also, the leadership demonstrated a continuing commitment to economic reform, free trade, and regional integration. Inflation jumped to 11% in 2000, largely due to higher oil prices. The 2001 tax collections forecast is a reflection of the above economic situation of the country. In addition, if we put this situation into the global world economic context, the question is to find out whether the projection is a suitable one? When the Soviet Union bloc broke up in the early 1990’s, the Republic of Vardar declared its independence. As the country established a monetary system, democratic processes, and a controlled fiscal system, the early problems of hyperinflation, unemployment, and declining standards of living slowly subsided. In late 1997 the country initiated a personal income tax, heavily dependent on taxes withheld by large employers on wages and salaries, but still broad in coverage....