No ease of burden to economy - H1 2013 saw no expected effects of business environment improvement

The first half of 2013 did not bring any significant improvement for the citizens or economy because Q2 did not see expected business improvement effects, new NALED Quarterly Report on Regulatory Reform Status presented on Friday (July 12, 2013) at Belgrade Media center shows.

An additional trouble spot is the fact that illegal behavior of institutions has been recorded. Therefore, the Republic Geodesy Bureau, the Veterinarian Administration and the Commission for Competition Protection have been charging fees for three months in the amounts which have not been approved by the Ministry of Finance and Trade. The Geodesy Bureau is still illegally charging two fees for one service and misbehavior was recorded at the Tax Administration as well whose branch offices refuse to register taxpayers which fulfill new conditions into the lump sum taxpayer status. This way, the state imposes illegal bookkeeping expense.

Changes in tax legislations which featured the quarter were more directed to budgetary income growth than economy taxes reduction. This has been exemplified in the changes of the Law on income tax through the increase of non-taxable salary portion and tax reduction (with higher PII). NALED’s calculation shows that employers’ savings as of the moment these changes became effective is - zero. The Pension and Invalidity Fund gains RSD 27 billon, the biggest losers are municipalities (20 billion) while workers can expect net salary increase of RSD 47.

In the Q2, the Government did not invest effort to adopt at least one recommendation provided in the process of the Overall regulations reform or in the NALED’s Grey Book. Therefore, 66 recommendations of SRP more which would contribute to savings of EUR 36 mil remained unsolved. Also, none of the parafiscal taxes was cancelled. Barometer of NALED regulations which monitors adoption of 362 bylaw documents within 25 system laws shows adoption of 149 regulations more, 122 with deadline which has already expired, is on hold. In the second quarter, only seven bylaw documents have been adopted and the average delay is 719 days.

There has been a shift forward thanks to the fact that the Ministry of Justice and Public Administration started working on Draft Law governing the work of inspections and that the Ministry of Construction and Urbanism initiated the change of Law on Planning and Construction, but the Ministry of Labor, Employment and Social Policy is still not initiating the amendments to Labor Law. Another reason for concern lies in the fact that out of 29 laws that were adopted in the first 6 months of 2013 and had direct or indirect impact on businesses, twenty (20) were adopted by urgent procedure (69%).

The only one-stop shop system that has been consistently conducted in Serbia so far is the registration of business entities in the Business Register Agency (BRA). The second one-stop shop system – Central register of mandatory social insurance - has still not been consistently implemented. Whether the third one-stop shop system, this time for building permit issuance, will be established, remains to be seen in the forthcoming period. Particular attention is drawn to the untimely functioning of Real Estate Cadaster kept by the RGA. As NALED wrote in the report, there is no justification for a registration procedure to last for minimum one month and can even take over a year to complete. NALED proposes that the Law on State Survey and Cadaster should be urgently amended, to prescribe the maximum period of 15 days for the Republic Geodetic Authority to perform Cadaster registration entry, upon the receipt of request. It is reminded that the Business Registers Agency takes only 5 days for entries into their registers.

Another problem that both citizens and businessmen face is a practice determining that if there is a formal irregularity in tax report submitted to Tax Administration by the taxpayer, the inspector issues a conclusion, requiring the taxpayer to eliminate the errors, or to amend the report and other additional reports within three days. The problem is that this deadline is prescribed in „days", and not „working days", preventing the taxpayer to respond appropriately to Tax Administration requests. For the purpose of efficiently exercising the taxpayers’ rights, this deadline needs to be extended to at least three working days.

Taxpayers will be unpleasantly surprised with the news that in order to settle their tax debt, the Tax Administration will be able to sell their personal property at the first auction at a price of up to 60% of the estimated value, and not the previous value of 75%, while on the second auction they will be able to sell it for 30% of estimated value. There are also new rules for the delivery ot tax documents that call for caution. Namely, it is assumed that tax documents are received after the expiration of 15-days deadline from the submission of tax act to the post office for delivery.

In the end, when it comes to changes to both personal income tax, which deprived local self-governments of a portion of funds, and property tax, it is uncertain if the cities and municipalities will be able to compensate for the loss, which is why we may expect a new increase in taxes locally.