The state should strengthen the activities for countering shadow economy

After a promising first half of the year, with successful organization of the prize game Get the Receipt to Win, adoption of the Law on Work Engagement of Seasonal Workers, defined tax exemption measure for new businesses, established institutional capacities for processing illegal trade offenses in the prosecution, and introduced progressivity in penalties for tax offenses, the Government of Serbia slowed down the reform tempo in countering shadow economy. This is the view of NALED’s Fair Competition Alliance (FCA) which provides expert and material support to the state in countering illegal trade and unregistered labor.  

The new National program for countering shadow economy 2018-2020 has still not reached the Government’s agenda, even though the Expert group adopted the document within its session on 20 April, which was attended by the Prime Minister Ana Brnabić. The new decision on the Coordination Body for countering shadow economy, in line with the changes that occurred in the Government structure early this year, is also still awaited.  

- The most significant progress in 2018 was achieved in the fields in jurisdiction of the ministries of agriculture and labor, with the adoption of the reform Law on Simplified Work Engagement on Seasonal Works, which will help in reducing the scope of unregistered employment in agriculture, as the sector with 65% workers that go unregistered. There has also been some progress in the field of inspection oversight, and we expect even better results by the end of this year once the digitalization software for risk analysis becomes more broadly used, enabling better planning of the inspections’ work by linking the market, administrative, sanitary and labor inspection. However, some of the key reforms, such as the establishing of e-registry of fees and charges and the elimination of para-fiscal charges, or the expansion of scope and modernization of fiscalization system, have been pending for years, and their finalization is not expected anytime soon – said the President of Fair Competition Alliance and the President of Societe Generale Bank’s Managing Board Goran Pitić.

The Alliance indicates that fiscal consolidation has created room in the budget to allow higher focus on the realization of measures which would enable easing the fiscal burden to businesses and increasing the share of legal businesses compared to illegal operations. NALED’s analysis has shown that the scope of shadow economy among the registered businesses has dropped from 21.2% to 15.4% BDP over the past five years, but there is still a large share of non-registered businesses operating entirely in the illegal sphere (17,2%).

New-old management of the Fair Competition Alliance

The Fair Competition Alliance brings together 26 socially responsible companies, including some of the largest taxpayers and employers in the country, paying an annual sum of more than a billion euros into the budget, and employing more than 40,000 workers. During 2018, the Alliance and NALED have initiated and ensured nearly 1.5 million EUR for projects and initiatives focused on countering shadow economy, such as the support for coordination and harmonization of the work of inspections, introduction of plea bargains for misdemeanors, the development of legal framework and the software for registration of seasonal workers, capacity building of inspections and courts, the prize game with fiscal receipts etc. The projects are realized with the support of international partners such as the GIZ, EBRD, USAID, the Netherlands and Norway.

With a recently held session, the Alliance members have once again elected Goran Pitić, the President of Societe Generale Bank Managing Board, a the President, while the vice presidents of FCA are now Vladimir Tipsarević, Public Relations and Communications Director in Coca-Cola HBC Serbia and Igor Lončarević, Partner and Head of Tax and Legal Affairs in KPMG.

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