Serbia Clamps Down on North Kosovo Tax Cheats

Serbia's tax officials in charge of Kosovo said they had reintroduced VAT on incoming petroleum products, telecommunications and vehicles from Serb-run North Kosovo. The move was put into action on Tuesday.

Borislav Stefanovic, head of Belgrade's negotiating team with Kosovo, said the move was designed to stop smuggling from North Kosovo and put people there on an equal footing those in Serbia.

The tax was introduced "to curb abuses in three fields - petroleum, telecommunications and motor vehicles - which were abused the most," Stefanovic told Balkan Insight.

Until now, North Kosovo has effectively been a duty-free zone, as the Serb-run enclave is out of the de-facto control of the Kosovo government.

Producers of products and services have not been liable to pay VAT, making prices of many goods lower there than in Serbia or the rest of Kosovo.

Illegal financial activities have flourished in the zone between North Kosovo and the Serbian border towns of Raska and Novi Pazar.

"Some individuals have been enriching themselves from this [tax-free status] for years," Oliver Ivanovic, State Secretary in the Serbian Ministry for Kosovo, told Balkan Insight.

In future, for example, people buying cars with North Kosovo license plates will have to pay VAT on the vehicle, which was not the case before.

Firms exporting petroluem products from Serbia to Kosovo will also have to show that VAT has been paid.

While Serbia says the move is intended to clamp down on smugglers and tax cheats, the fact that the move was a unilateral one by Belgrade has caused alarm in Kosovo and in the EU, where some see it as step towards formal partition or annexation.

"Any attempt by Belgrade to directly or indirectly establish its control in the north leads to the partition of Kosovo, which is absolutely unacceptable to Brussels," an EU source said.