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Conference on "“Taxation systems and politics, informal economy, and corruption in the Republic of Serbia” 17 December 2014

19 December 2014: NECESSARY FUNDAMENTAL REFORM OF THE TAXATION SYSTEM A national conference under the title “Taxation systems and politics, informal economy, and corruption in the Republic of Serbia” was held in Belgrade. The conference, within the regional project “Tackling taxation, informal economy, and corruption in the Western Balkans” was organized by the representative trade union centers in Serbia – CATUS and UGS ‘Nezavisnost’.Project holders are International Trade Union Confederation (ITUC-PERC) and Norwegian trade union (LO Norway).

In addition to the representative trade unions from Serbia, the other trade union organizations from the territory of former Yugoslavia, including Albania and Kosovo, also participate in the implementation of the project.
In addition to the representative of ITUC and LO Norway, and the national project team, members of the leadership and experts from UGS Nezavisnost and CATUS were invited to the conference, as well as representatives of competent ministries, state and independent institutions, Union of employers of Serbia, Chamber of Commerce of Serbia, and international financial institutions in Serbia, Economic and Social Council of the Republic, and the independent experts who work on the matters discussed at the conference, and representatives of media.
As usual, representatives of those institutions that are most responsible for the situation in the areas discussed did not show up – institutions responsible for adopting fiscal strategy and policies, implementation of specific relevant programs and measures for fighting informal economy and its most common forms of appearance – fiscal indiscipline and corruption. They are Ministry of Finance, Ministry of Economy, Ministry of Justice, Tax Administration, Labor Inspectorate... It was only the Ministry of Labor, employment, veteran and social policy, following several interventions, sent their representative, however without any authorization to present any assessment or position of that ministry or to answer any question. Unlike them, the Ambassador of Norway to Serbia and a representative of LO Norway, attended the conference and addressed the meeting, representative of European Union and European Commission to Serbia were also present. Of the national institutions – a president of the Union of Employers in Serbia and Secretary of the Economic and Social Council of Serbia were present.
Such an attitude of the competent ministries and current government, as a whole, towards the representative social partners, ITUC, the friendly Norway, whose Ministry of Labor finances this project, colleagues from Norwegian trade unions, as well the attitude towards the most important problems in the country, were assessed as utterly irresponsible and unacceptable.
The participants discussed the national report on the situation in the Republic of Serbia pertaining to taxation policies, informal economy, and corruption. Members of the national project team prepared the reports, and the competent authorities of both representative trade union centers adopted them.
Mr. Branislav Čanak, president of UGS Nezavisnost extended introductory speech, while Rajko Kosanović, Zlata Zec and Aleksandar Marković talked about the situation in the area of taxation policies, informal economy, and corruption. The comparative analysis of the situation in Serbia, compared to the countries in the region and EU member states, was presented by Mr. Martin Hutsebaut, ITUC expert, engaged in this project.
Conference participants gave their total support to the following positions and conclusions:
Representative trade union centers in Serbia – CATUS and UGS Nezavisnost have pointed out at the fundamental problems related to the taxation policies in the Republic of Serbia:

  • Expressed financial indiscipline in terms of respecting due liabilities towards the business partners, state, employees (payables cannot be collected, taxes and contributions for mandatory social insurance are not paid, salaries and other labor-based emoluments are not paid...);
  • Responsible state institutions do not function properly, particularly those responsible for control, which is reflected in non-application of required methods for controlling the duty to pay taxes and contributions, including the non-enforcement of adequate sanctions;
  • High level of informal economy due to relatively high fiscal burden on the labor; non-transparent taxation system; inadequately organized tax administration; high level of tolerance for grey economy; high level of unemployment; weaknesses and malpractices in the process of privatization; high level of non-liquidity; high share of cash transactions in total transactions and other reasons;
  • High level of corruption, and
  • Non-transparency, that is, concealing some unfavorable processes and trends and untimely and inadequate reaction of responsible authorities and ruling structures (political, not economic reasons).

By indicating fundamental problems related to taxation policies, trade unions have at the same time indicated a possibility for their solutions, particularly:

  • Fighting all forms of informal economy, through redefinition and application of, in practice, the principle of socially responsible business operation, as defined in the Strategy of socially responsible business operation,
  • Fighting corruption,
  • Engaging responsible state institutions, primarily – more efficient work of the inspection, taxation and other competent state authorities.

Trade union recommendations:

In order to achieve the intended function of taxation system – securing real sources for financing of real social needs, in line with the laws, and harmonization of public revenues and expenditures, it is essential to:

  • Pursue a genuine, fundamental reform of taxation system by introducing new fair, economically and socially justified system of taxation (progressive taxation, increasing the non-taxable part of income, different rates for certain tax bases... and other);
  • Ensure full transparency in the implementation of taxation policy, which means inclusion of relevant social partners in the creation of fiscal policy and its implementation (adoption of the Republic budget, making public and sanctioning of cases of financial non-discipline, and social, moral even financial stimulation of socially responsible employers (i.e. white and black book of taxpayers);
  • Establish better, more rational, and efficient structure of tax administration (personnel, competences, powers, and other working conditions... and other);
  • Secure normative, structure, personnel, and financial possibilities along with enforcement of different preventive, stimulating, and punitive measures and methods related to control of tax and contribution payment;
  • Reduce cash transactions in total transactions, aimed at reducing possibility for disrespecting or breaching rules related to these area;
  • Fully implement national strategies for socially responsible business operation and fighting corruption, in line with the applicable legislation and without any interference.

In reference to the engagement of trade unions on reduction of extent of informal economy, it is necessary to, based on the assessment of participants:

  • Act preventively through contacts and education of final year students about the labor market, possibility of employment, ‘advantages’ and dangers of labor in ‘grey area’ and possible protection offered by trade unions...;
  • Influence the contents of curricula in vocational and other secondary schools, including universities, through institutions of social dialog, fight for as complete as possible harmonization of educational process with real needs of modern, market oriented economy;
  • Influence directly the legislative activities, through the work in tripartite bodies and working bodies;
  • Obtain trust of those working in grey economy (particularly construction, trading, among street vendors and employees of big shopping centers... and other), by entering trade union activists among them, learning about their everyday problems and offering concrete assistance by:
  • Establishing a free telephone number for legal and other pieces of advice to persons engaged in informal economy;
  • Offering financial support and assistance in case of a need (e.g. sickness of an employee without labor contract and health insurance, or members of his/her family);
  • Communicating with Labor inspectorate, so that those engaged in grey economy do not get exposed and jeopardize their own and existence of their families);
  • Offering free legal aid and representation in case of court proceedings;
  • Establish contacts and cooperation with institutions (Youth and Student Cooperatives) used to engage most of workers in grey economy, particularly young people who for the first time look for job;
  • Enhance cooperation and social partnership with employers with the sole purpose of joint actions aimed at creation of necessary conditions and favorable terms for employment, and/or reduction of “attractiveness” of work “on black” through socially responsible business operation);
  • Intensify cooperation with NGO’s and Associations with experience and achievements in the work with group, most commonly involved in grey economy;
  • Educate trade union activists and make them capable of recognizing, in practice, all forms of unregistered work, particularly those concealed within legitimate employment (payment of salary at hand to avoid payment of liabilities for tax and contribution), so that they can correctly and timely react to such phenomena;
  • Organize campaigns against work “in black”, primarily in the areas where this phenomenon is so expressed, along with publication of the so-called white and black lists of employers who behave socially responsible or employ unregistered workers and exercise other forms of informal business operation;
  • Achieve full transparency in the work of Trade unions, particularly in terms of undertaken measures and activities, including the achieved results in the area of fighting unregistered work and other forms of informal economy (all forms and methods of promotion and advocating these activities in media, placards, billboards, flyers, brochures…).

The conference participants have emphasized the relevance of joint, coordinated efforts of all relevant social stakeholders. To that end, special focus should be on the development of social dialog and tripartite activities, as well as social partnership at all levels. This is a sine qua non condition for consensus on policy of economic and social development of every country, and within this policy, measures for suppressing current informal economy and prevention of new forms, that is, prevention of further spread of these, unlawful activities with far reaching consequences.
It was stated that the representative trade unions and employers organizations have to be treated as equal social partners, through their participation in creation and implementation of total developmental and all other policies (fiscal, pricing policy, income...). They must be able to exercise influence on the work of state and other authorities, organizations, and institutions, participate in formulation and implementation of taxation and the policy of controlling the informal economy.
The conference participants are informed about the plan to continue with this project and the planned project activities for the next year.

this article has been tagged

South-East Europe , Informal economy, shadow economy , Decent Work , Sustainable economic growth policies , Democracy and Social Dialog , Serbia , corruption , CATUS , NEZAVISN
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