BRANKO RUŽIĆ, Minister of State Administration and Local Self-Government in the Serbian government: FOCUS ON ‘UNHEALTHY’ PART OF ECONOMY

Inspectors are front row centre in combating shadow economy. Hiring younger inspectors and introducing new institutes which, for the first time ever, enable preventive action, as well as much tougher measures against offenders will make this year an exceptionally important one for promotion of the new approach in eliminating this negative occurrence

The Ministry of State Administration and Local Self-Government has one of the most important roles in combating shadow economy.

The National Programme for Combating Shadow Economy was drafted in late 2015. What makes this year special compared to the previous period, in this context?

At a meeting of the Expert Group for Combating Shadow Economy, we concluded that all the activities, carried out under the framework of measures aimed at achieving the goals stated in the National Programme, such as building the capacity of inspections, should be considered priorities. To illustrate this point, let me mention an action plan for hiring younger inspectors which is considered a high priority measure, primarily because there are really very few inspectors in Serbia, with the average age of an inspector being 54. Also, new measures are being implemented in cooperation with the Justice System and the Ministry of Justice, which has been actively participating in improving the legal-judicial practice in combating shadow economy.

Which segments does the Ministry cover in terms of the work done by the Coordination Body for Combating Shadow Economy and the Expert Group?

I have been personally participating in the work done by this body and I would like to underline that two of four goals from the National Programme are primarily implemented through the measures managed by the Ministry of State Administration and Local Self-Government. More efficient monitoring of the developments in the shadow economy, which is one of the set goals, is achieved primarily by improving the inspection supervision system that the Ministry covers with its Coordination Commission for Inspection Supervision. Building the capacity of inspections for planning, implementation and reporting on inspection supervision, establishing mechanisms for ensuring transparency of inspection supervision and ensuring interaction with citizens and businesses are the main activities that the Ministry is implementing with the view of achieving the objectives of this fight against shadow economy. Raising awareness among citizens and businesses about the importance of fighting shadow economy and ensuring there is enough motivation for adhering to regulation are also the goals that the Ministry has been realizing primarily through organizing the “Take the receipt and win” prize game, but also through promotional activities related to the new “Inspection Approach” where businesses are continuously informed of their rights. Thanks to the campaign on creating a new image of inspection jobs, we are beginning to underline the importance of changing the awareness about the role that inspectors have in fighting for a better society as a whole, but also about the importance of joining forces, i.e. state institutions, businesses and citizens jointly participating in the fight against shadow economy.

Inspections are an important factor in eliminating shadow economy, and in the past period, the legal framework and the reform of the work done by inspections have received a lot of praise from the investors. How much should inspectors be credited for the results accomplished in combating shadow economy?

Inspectors are front row centre in combating shadow economy, while the Law on Inspection Supervision stipulates a novelty that is quite revolutionary for our system, and that is inspection supervision of unregistered business entities. In the past, inspectors were not allowed to enter, for instance, an unregistered boutique that is located in a flat, or penalize street vendors for selling things with cardboard boxes as their stands. Today, inspectors can do this and this is where the focus lies, namely on the “unhealthy” part of our economy, i.e. those people who consciously and deliberately violate the law by going against fair competition and market rules while jeopardizing the safety of people, our property and the environment. Serbian inspections also have another new role to play, that is being, first and foremost, advisors to businesses. The system that we are putting in place closely follows the history of a business, which determines an inspector’s approach towards that business entity, namely whether an inspector will act as a partner to a “good business”, or act in a repressive manner towards those subjects who are deliberately operating in shadow economy, or violating the law. Regarding your question about concrete results that illustrate the importance of inspectors in fighting shadow economy, let me just say that, since the beginning of the implementation of the law in January 2018, out of 784,275 inspection supervisions, 10,414 were carried out in unregistered business entities. Also in January 2018, the Labour Inspectorate found 781 undocumented workers with 675 becoming documented workers following the supervision.

In stark contrast to the previous model, the Coordination Commission for Inspection Supervision now functions in an inclusive manner. How receptive are businesses towards this preventive-educational approach?

We have tailor-made the entire reform and the system to result in an improved business environment and I am very pleased to see that businesses have been reacting so positively to all the changes that we’ve been implementing. According to the latest survey from 2017, only 13% of business people consider inspectors an aggravating factor in business, while in 2011, this percentage stood at over 50. I would also like to underline that businesses wanted this law to be passed and that from the beginning of the reform, we have been working closely with all business associations. Their participation in the Coordination Commission is very important to us, because they help us to better understand the situation and come up with better solutions.

The Economic Advisor Office is expected to be opened soon. What will be the Office’s role in combating shadow economy?

Throughout this entire inspection reform project, the Ministry has been enjoying a great support from USAID BEP, EBRD and NALED. EBRD provided assistance for the institution of Economic Advisor for Inspection Supervision which is yet another reformatory step in this segment. The Advisor will become a permanent communication channel between businesses and the state in issues that concern inspection supervision, i.e. the place where businesses will be able to obtain information, inquire, voice problems and get advice.

How interested are local authorities in this year’s „Take the receipt and win“ prize game? Which municipalities have shown the biggest agility and what prizes await the winners?

One of the measures of the National Programme for Combating Shadow Economy (which gave birth to the idea for this prize game) is aimed at motivating citizens to take receipts for purchased goods, and by doing so, are actually contributing to the 20% tax not ending up in the hands of negligent shop owners and caterers, but rather it being spent on schools, hospitals and roads. In this round, we are giving prizes to municipalities which population was the agilest in participating in the prize game because we want to practically demonstrate where the taxpayers’ money ends up. The municipalities rewarded last year invested in the construction of schools, tourist info centres, children’s playgrounds, taking care of historical-archaeological sites and restoration of public squares. In this round, the prize fund was increased from 100,000 EUR to over 200,000 EUR, and instead of only 5 municipalities, this time around we are going to reward 9 municipalities which citizens were the most diligent in sending the receipts they collected. These municipalities will be awarded 23,000 EUR each, in dinar counter value, that should be spent on implementing projects like providing equipment and renovating public facilities and spaces, as chosen by their citizens. Currently, Blace, Savski Venac and Vranje are the leading municipalities, each in their own category.

What impact does this game have on the municipalities’ interest in participating in the fight against shadow economy in the long run? Where do you see the most room for them to work on combating shadow economy?

Better the tax collection, more money there will be in the budgets for roads, schools, health centres. And we are not only talking about the state ones but also the local ones too, because income tax is considered one of the direct revenues for local budgets, so, I would say, that they are very interested in combating shadow economy at the local level.

What are the Ministry’s further plans for this segment?

Our plan is to further build the inspection services, staff- and financially- wise, in order to meet all the requirements imposed by the reform. We also plan to improve the reputation of inspectors, because the goal of everything we do in the field of inspection services is not people fearing business inspectors, but rather come to understanding that inspectors are here to ensure that laws apply to everyone equally, that everyone has the same obligation in terms of paying taxes, documenting their employees, marketing safe products and protecting the environment. Inspections are concerned with our safety, they control the sanitary conditions and the food we eat in restaurants, schools and nurseries, and the safety of the playgrounds our children play on. Hence, it is important for the public to understand that inspections are not our enemies, but that they are, despite an insufficient number of them and the difficult working conditions, in the forefront of fighting for our security, health and a fair business environment. This is why fighting against shadow economy is something that all of us – the state (inspectors), businesses and citizens – are involved in.

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