With the coronavirus, life has almost stopped. With it, the market as well.
A large number of small businesses, shops and services such as cafes, restaurants, hotels, hairdressers and beauty salons do not work.
Production stopped as well – they have nowhere to buy raw materials or sell anybody.
In order to alleviate the “crisis that no one has ever faced before”, the Government of Serbia has prepared a package of measures relating to direct assistance to businessmen and employees.
Tax breaks were also presented and promised direct assistance to all adult citizens of 100 euros each in RSD equivalent.
The plan is for the state to help the most vulnerable SMEs employing more than 900,000 people.
They are aimed at preserving the “backbone of the economy” – small and medium-sized enterprises.
Serbian President Aleksandar Vucic has announced that they will receive assistance in the next three months “to survive”, but only on condition that they have not laid off more than 10 percent of workers since mid-March.
“We will pay a minimum wage to every hairdresser, shoemaker, baker, every employee of their company. The hairdresser cannot make money now, but he will have to pay the minimum wage both to himself and his employee”, Vucic said on TV Prva.
As of January 1, the minimum monthly salary is 250 euros.
The Serbian Government’s economic assistance package is worth about 5.1 billion euros.
“That’s half our budget”, said Finance Minister Sinisa Mali, presenting the measures.
The first point involves tax breaks – to defer payment of payroll taxes and contributions to the private sector for a minimum of three months.
These debtors will be able to repay these debtors in 24 installments beginning at the earliest from 2021.
It will defer payment of corporate income tax as well as property tax for legal entities and entrepreneurs for the period from April to June.
Companies dealing with humanitarian work and donations will be exempt from VAT.
It will cost the country about 1.3 billion euros.
“The state has taken on this burden of taxation to encourage businessmen to pay only net wages and keep employment”, Mali said.
The second measure is direct assistance to small businesses paying a lump sum tax through cash payments of three minimum wages.
“The payment is planned in two months from mid-May to prevent abuse”, Mali said.
The support is also intended for those who have been fired – they will receive 50 percent of the minimum wage in the next three months, in addition to the severance pay they are legally receiving from the employer.
The third point is to support liquidity through favorable loans from the Development Fund and loans from commercial banks, which will be supported by the state.
“These loans will help businesses have working capital – and get out of the crisis”, Mali explained.
When a firm is out of business, it “has no money to pay workers, no money to pay taxes to the state and no pay to suppliers”, Ivan Radak of the National Alliance for Local Economic Development (Naled) told the BBC.
“Then even suppliers do not have for their workers, the state does not fill the budget, and employees do not have the money to buy for themselves what is needed, which is how the economic illiquidity virus moves”, he explains.
Large companies are also targeted for assistance through corporate bonds, which will help them have capital for new investments, not just for raising money.
Small businesses are now in the worst situation, and with these measures they are relieved, Naled claims.
“They do not have to pay taxes immediately, and the state will pay them workers at least a minimum.”
“Credit relief and short-term borrowing are important so businesses can pay off VAT as the deadline approaches”, Radak says.
Naled’s survey found that the largest drop in revenue was more than 50 percent in the tourism and hospitality, transportation and transportation sectors.
The food and wood industries also have a problem, with banks, IT, and the pharmaceutical industry facing a 20 percent drop.
“These measures are good to overcome the coming months, with March and the first blow to the economy on their backs. Other countries have done the same”, Radak said for BBC.
