The Serbian Police Directorate conducted the investigation and the arrests in cooperation with the Tax Department and the Chief Prosecutor’s Office.
According to the indictment, between Feb. 1, 2009 and Dec. 31, 2010, the suspects hired people to pose as owners of “laundering companies,” and falsified documents about merchandise and services allegedly provided by these companies. The forms referred to fake business deals between the “laundering” companies, with a cash flow of nearly US$1 million.
The money was later transferred from the front companies to bank accounts connected to the agricultural estates of seven of the suspects. They then withdrew money sometimes under the guise of business expenses. They would return the cash to the original financial backers. In this manner the suspects acquired nearly US$1 million and evaded some US$360,000 in taxes.
According to the Statistical Office of Serbia, it is difficult to determine the exact amount of economic production that goes untaxed, since only estimates exist of total production in the country. The most significant way in which the Serbian state budget is cheated out of tax money is through businesses reporting lower earnings while exaggerating production costs.
In a 2010 survey the Serbian Association of Employers and the Social and Economic Council asked 227 businesses about the sources and consequences of the underground economy. More than half of the correspondents cited sales via illegal advertising as the worst way some companies gained an unfair advantage. The second most cited complaint was undocumented sales on open markets, and a close third was sales in undocumented stores. Ilegal door-to-door sales and improvised street stands also were cited as methods of gaining unfair advantage.
The respondents said it is easier to find workers willing to work at businesses which avoid paying taxes and worker benefits, as these businesses offer higher pay than those which operate legally.
When asked what allowed for the survival of the Serbian informal economic sector, 46.70 percent of the respondents pointed to the inefficiency of economic and financial inspection, followed by the lack of political will to deal with the underground economy. Respondents also cited insufficient response from the police.
