SERBIAN GOVERNMENT: PROGRAM OF ANTI-CRISIS MEASURES

PROGRAM OF ECONOMIC MEASURES OF THE GOVERNMENT OF THE REPUBLIC OF SERBIA AIMED AT REDUCING NEGATIVE EFFECTS OF THE CORONA VIRUS AND SUPPORTING SERBIAN ECONOMY

On March 31, 2020 the Government of the Republic of Serbia published the Program of Measures Aimed at Reducing Negative Effects of the Corona Virus and Supporting Serbian Economy (hereinafter: Program), which was explained by the Finance Minister, Siniša Mali.
Main objectives of measures contained in the Program are:

• to maintain employment during the state of emergency and
• to help enterprises whose functioning has been made difficult, primarily entrepreneurs, micro, small and medium enterprises.

In order to help the economy and the citizens, a total of 608.3 billion dinars (5.1 billion euros) was set aside, which represents a half of the budget of the Republic of Serbia or 11% of its GDP.
The aid will be financed:

1. partly from the budget and
2. partly through credits taken on domestic and international capital market (with public debt never exceeding 60% of the GDP).

Program contains four sets of measures
The first set of measures is related to the payment of taxes, aimed at protecting the liquidity of business entities. State will take over the payment of 161 billion dinars (1.3 billion euros).
The list of tax relieves contains:

1. delay in paying taxes on wages and paying contributions for private companies during the state of emergency (with a subsequent payment in installments, starting from 2021 at the earliest);
2. delay in paying income taxes for all independent entrepreneurs.

Employers who choose to use the measure under 1) may use the delay in paying taxes on wages and paying contributions till the beginning of 2021, and afterwards they will have a possibility of a further delay up to 24 months, but no longer – without the obligation to pay any interest.
Delay in advance payments of corporate income tax in the second quarter of this year is aimed at increasing the liquidity of tax payers.
Also, givers of donations will be exempted from paying VAT.
The second set of measures is related to directly helping both entrepreneurs paying flat-rate taxes and those paying income tax – micro, small and medium enterprises in the private sector. During the state of emergency they will be paid an aid equal to minimum wage.
Big enterprises whose employees were sent on forced leaves due to the reduction of business activities or complete work stoppage, will be paid a per-worker-aid equaling to 50% of the minimum wage.
This package will cost 97.3 billion dinars (824 million euros), and the money will go directly to workers (around 900,000 of them) through a special account.

The third set of measures is related to protecting the liquidity of business entities. The following is planned:

1. granting credits for safeguarding liquidity and current assets for companies managed by entrepreneurs, micro, small and medium business entities, agricultural husbandries and cooperatives through the Development Fund;
2. creating guarantee schemes for the support of economy through commercial banks, where the state will be a warrantor.

One of the ways of financing, which big companies can rely on, is a corporate bond.
Measures contained in those three sets of measures are not applied to business entities which:

1. during the state of emergency reduced the number of employees by more than 10% (excluding employees with fixed-time contracts whose contracts are to expire during the state of emergency);
2. temporarily interrupted their operations before the announcement of the state of emergency, i.e. before March 15, 2020.

The Fourth set of measures is related to a 100 euro (per person) aid, which will be paid to every citizen of age.

***

Having in mind that first of the proposed measures will start taking effect only in the second half of May this year, we are of the opinion that they were taken with delay. We also think that certain measures had to be more selective. For example, the aid amounting to 100 euros will be paid to every citizen of age regardless of their level of income, which means that the same amount will be granted to those earning over 200,000 dinars per month and those having no income at all. This example is sufficient to show the unorganized nature of our system of social protection and the effects of non-existence of adequate so-called “social cards” (personal income and ownership data).
It is quite clear that in 2020 Serbia won’t reach the planned growth rate of 4%, but most probably will see it halved.