Solving just the 10 priority recommendations of the Grey Book 13 would revolutionise business environment in Serbia, and this is not an unattainable goal. For some of them, we have already secured financial donations and provided software. Some require just the will to change outdated regulation or IT creativity and engineering. Just a couple of them need extensive funding or in-depth analysis and delicate decision making
At first glance, the choice didn’t seem that difficult, as our top ten recommendations directly affect both business and the public. They can reduce costs and facilitate administrative procedures, as they eliminate unnecessary bureaucracy and the need to submit documents in person.
Reducing payroll deductions is both the most important business recommendation and the longest-lasting one in the Grey Book. NALED research has found that two thirds of business leaders think payroll deductions are the greatest obstacle to business and believe this obligation is the one most often avoided. This recommendation has been one of the key measures of the National Programme for Suppression of the Grey Economy since 2015. Although burdens on net income have gradually changed, coming down from 63% to 61% between 2018 and 2020, this has not been enough to eliminate the grey economy. Business leaders estimate that at least a quarter of all workers receive part of their payment in cash. Reducing payroll deductions is a particularly demanding reform, and we propose progressive taxation so that lower incomes are taxed less.
We also propose abolishing contributions for obligatory healthcare and introducing the Beveridge model that would allow healthcare to be financed from general taxes. This would provide healthcare for all Serbians regardless of their employment status, increase our business competitiveness with lower labour costs, relieve the state administration, companies and the public as the validity of health insurance cards would no longer need to be extended, and make it easier to control funds for crucial healthcare investment. The data indicate that more than 98% of the population has some form of health insurance, while just over half (55%) pay healthcare contributions. This reform can be designed so as not place an additional burden on the budget (5% of new beneficiaries), and it would allow everyone to have health insurance, while businesses would get an incentive they can really feel, to forge ahead with economic development.
REGISTER OF NON-FISCAL CHARGES
Establishing a register of non-fiscal charges is another long-standing Grey Book recommendation. Passing the Law on Fees for the use of Public Goods in 2018 was the first important step towards reforming them. But the scope of these fees remained insufficiently defined, which still affects the predictability and transparency of the fiscal system. A public, electronic register of non-fiscal charges is needed, including all state, provincial and local charges, with obligatory effect. This would mean that a non-fiscal charge can be collected only if it is in the register. This would allow people and businesses to have secure knowledge of charges, and increase income control for all beneficiaries of public funds. Over the past year, with the help of KPMG and USAID, we listed almost 1,200 non-fiscal charges at the national level and scanned the system that collects administrative and utility fees at a local level. We are preparing this reform and the registry, as we want to present its appearance and advantages to the institutions and to the professional and general public.
Proposals to introduce non-cash payment of charges and unification of tax certificates is a good example of an antibureaucratic recommendation. It is evident that non-cash payments would save time and money for people and businesses. This would also allow us to abandon another relic of the past – payment slips – that forced us to run back and forth between bank and counter. The proposal to unify tax certificates issued by the central and local tax administrations would be a logical step to digitalising their issue. The next step could be to merge the two documents into one, and receive them electronically without payment, which would eliminate the hazard of one certificate expiring before you can get the other.
Establishing an electronic health card is the most urgent priority. Again, this recommendation has implications for everyone. The benefits are evident, as data on health conditions, tests and therapy would always be available, no matter whether the patient is at a private or state medical institution. Having to repeat medical examinations, laboratory analyses, or return to health centres to get referral letters would become another relic of the past.
This crucial recommendation for public health and well-being could be coupled with the recommendation for improving wastewater treatment. Since there are currently only a dozen treatment plants in Serbia, and we need over 300, it is evident that we are far from our goal. But the first step would be to make it easier for companies to fulfil their obligations, then to strengthen the supervision to enforce them. Finding the funds for investment would be the next step. The state has provided support to build 28 more plants, signalling an awareness of the issue.
We are actively trying to extend the simplified procedure for registration of seasonal workers to new sectors: construction, tourism and hospitality, and domestic work. With the help of ministries, we are trying to expand this system as we have seen the positive effect this GIZ-supported electronic procedure has had on agriculture, with 44,000 seasonal workers registered in two years and taxes and contributions paid amounting to 590 million dinars. Workers who have been doing these jobs illegally for years or even decades will have the right to pensionable employment and healthcare in case of an occupational accident, and they would not lose their right to social benefits. Employers would have a simple registration procedure, and the state would have less people working in the grey economy. The importance of this recommendation was also highlighted by the IMF.
DIGITALIZATION OF AGRICULTURE
Digitalising a traditional sector such as agriculture is another priority. Registering or changing data about agricultural holdings proves to be a highly bureaucratic process, as it involves collecting and submitting many documents, two thirds of which are already in the possession of state bodies. An electronic system, called eAgrar, would allow people to finalise these procedures and apply for subsidies from their homes. The scope of this reform is also important, involving almost 400,000 agricultural holdings that would receive incentives faster and more easily.
On the other hand, the importance of the recommendation to abolish fees for land conversion to full property rights is primarily reflected in its potential economic impact. From 2015 to 2019, the state collected only seven million euros for land conversion, but lost investment and jobs amounting to tens or even hundreds of millions (loss of fees, income and corporate tax, VAT, etc). This conversion has blocked the use of a vast area of construction land, as businesses feel they are forced to pay for the land a second time. Even when they start the conversion process, the final decision can arrive years later or the fee to be paid could surpass the initial cost of the land. It is obvious that conversion fees have not served their intended purpose, and now it is high time to abolish them and encourage investment.
And finally, if we are looking for the champion among overly complicated bureaucratic procedures, it would definitely be the Law on Foreign Exchange Operations. Just the fact that this regulation is followed by 33 bylaws should say enough. These acts impose very restrictive obligations and short deadlines, most of them out of sync with contemporary business operations. Every single Serbian company doing business abroad would support such a reform.
SUPPORT FOR THE IMPLEMENTATION
Solving just the 10 priority recommendations of the Grey Book 13 would revolutionise working conditions in Serbia, and this is not an unattainable goal. For example, we have already secured financial donations and provided software for some of them: establishing the register of non-fiscal charges and expanding the simplified procedure for registering seasonal workers. To abolish conversion fees or amend the Law on Foreign Exchange Operations what is most needed is just the will to change outdated regulation.
Establishing an electronic healthcare card, non-cash payment of charges, eAgrar and unifying tax certificates requires a lot of IT creativity and engineering, but apart from the time necessary to design and test the solutions, there is hardly any obstacle to these recommendations, not even amending laws and bylaws.
The construction of water treatment plants sets a clear goal, finding billions of dollars in donations, as this is the estimated price for the sewerage network and plants. Until then, establishing a functional model to reduce payroll deductions is the most delicate and long-lasting recommendation in the Grey Book.