A present for big companies, a risk for small ones – Will tax incentives for newly employed save money and reduce unemployment?

On 1 July, when amandments to the Tax Law come into force, employers in private sector would have right to return part of the taxes and contributions on employee's earnings. Establishing employment with at least one, and most nine employees, the entrepreneur would return 65% of the taxes, 70% if he employs 10-99 employees and 75% for employing at least 100 new workers.
Observing it through the prism of money, according to current parameters for the payroll (which implies tax at 10%rate, with tax relief of RSD 11,242.00, social insurance contributions out of earning, 19.9% and on earning 17.9%), for RSD 30.000 net earnings the employer needs to pay RSD 48,565.72. Accepting these tax incentives, for such a salary, an employer who has right to return 65% of paid tax and social insurance contributions, will pay RSD 36,498.00 in the future, RSD 35,569.72 if he expects a refund of 70% and RSD 34,641.43 or the refund of 75% of paid taxes and contributions.
These tax incentives will be paid back in 155 days from the day of payment, and will be valid by 30 June 2016.
The idea of the legislator was to stimulate legalization of current workers, who work in the grey market and encourage foreign investments. However, although the saving is not negligible, the employers are under pressure of high taxes for currently employed people.
Even before the tax incentives were accepted, Fiscal Council warned that it is not in accordance with good tax practice, because it is going to make difference in tax treatment of the employed and newly employed people in the following two years.

Owner of a Belgrade company, who employs about 30 workers, says that those changes are going to legalize workers' positions slightly. The law favours big companies which start their business, but it is not a case when we speak about small players who struggle to survive in the market.
- Successful big companies, which have already planned to employ new people, will receive this two year tax incentives as a present. On the other hand, it does not mean a lot to small companies. Problem will come up after June 2016, when tax incentives are not valid any more. They will not be able to pay all the workers because of imposed taxes.
An accountant from Belgrade cosiders those measures more effective if they would refer to all the employed people.
-Why should someone legalize the 10th or the 100th worker, even if he does not pay the taxes, if, on the other hand, he does not have money to pay for the rest 9 or 99 old workers. This could be a condition for refunding certain percentage of the paid taxes or contributions for compulsory social insurance.
Although it is just a month until the amandments to the Tax Law come into force, there are many vague parameters for the employers and accountants. What happens if an employer terminates the contract with an employee, and what if an employee does it? Is it possible, and in which period, an employer can not terminate the contract with an employee? Could an entrepreneur substitute the worker and under which conditions? Are ther any penals, who do they refer to, in what cases and how much they are – those questions haven't got an answer so far.

- As it comes to Serbia, laws are not enough. Actually they are nor clear and precise, so we expect a book of rules and opinions of the competent ministry – says the accountant.

Strict control
Assisstant of the minister of finance in Serbian government, Irina Stevanovic Gavrovic stated in the Belgrade Chamber of Commerce today that the Department of Public Revenues will intensify control, as well as punishing those who violate the rules. She said that rights of the employees will be fully respected in terms of pension insurance.

Limits
One more thing, however, came into public and made suspicion if the amandments are good or not. Although new tax incentives refer to employing the new workers, regardless to their age, number of those who will get a job in this way is limited. Unemployed people who are not applied at the National Employment Service (NES) or who have recently finished their education have to wait 6 months to apply for a job at the employers who are dealing in accordance with the Law amandments.
As the acountant says, according to previous Law and Employment Support Regualtion in 2011, the employer could obtain a subsidy to a part of the taxes and contributions when he employs a person who was unemployed at least 6 months before the engagement. New changes say that the employer has right to refund a part of the paid taxes only if he signs a contract with a person who was applied at NES at least 6 months before being employed, respectively three if he starts as a trainee.