“Invisible” Balkan Freelancers Battle for Truthful Taxes within the Digital Age – Evaluation – Eurasia Assessment

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Well-trained but relatively cheap freelancers in the Balkans are in great demand from foreign companies. However, they deplore the persistent efforts by governments to regulate the sector and collect taxes.

By Sasa Dragojlo, Sinisa Jakov Marusic, Danijel Kovacevic and Samir Kajosevic

When the Serbian government and the Internet Workers Association signed a tax deal last month, association president Miran Pogacar said a battle had been won but the war had not yet been won.

The deal followed months of appearances, cyberattacks and tent protests by Serbian freelancers who were appalled when the Serbian tax office announced last August that it was severely and retrospectively taxing residents who had received payments from abroad in the past five years would.

The announcement was an attempt to replenish state coffers, depleted by the economic impact of the COVID-19 pandemic, and to grapple with a gray economy that has spawned around tens of thousands of freelance and digital workers hired but not formally employed. by foreign firms looking for remote, educated and cheap labor.

These include language teachers, digital workers on freelance platforms like Upwork, journalists, web designers, music or video editors, translators, and a host of other professions that are suitable for remote working in the digital age.

They are not recognized as classic workers under Serbian labor law, and the companies they hire are not required to pay social security contributions to the state. Such payments fall on the individual, as does the obligation to pay income tax.

As part of the April Agreement, retroactive taxation will be staggered according to income, while a new law on “flexible working relationships” is in the works.

“This is a success but not a complete win,” said Pogacar. “We prevented a disaster, but we have to think about the future.”

The same applies to much of the Balkans, where there is a rich supply of poor but educated young people.

“In today’s global economy, freelance work is essentially the job of a poor man from ‘medium-sized societies’,” said Svetislav Kostic, professor of tax law at Belgrade University.

“These societies are able to create enough educated people to offer their skills in the international market, but they are also poor enough to be attractive and cheap for companies.”

But if wages rise and the state steps up its efforts to regulate the sector, the region will lose its appeal, he warned.

“The foreign employer completely burdens the freelance worker. If it stops being inexpensive, they will find another country and another worker willing to work for less, ”Kostic told BIRN.

“A country that sees freelancers as a future has no future at all.”

Invisible in Montenegro

Milos, a photographer in Montenegro, sells pictures to foreign newsrooms but is registered as unemployed because the Montenegrin labor law does not recognize the terms “freelancer” or “self-employed”.

“Although I’ve been working as a photographer for more than a decade, I’m officially unemployed,” Milos, who asked that his last name not be used, told BIRN.

“I can’t pay a pension or health insurance because our laws don’t recognize freelancers. Some of my colleagues have registered their own companies so they can pay for insurance. “

Since the law does not recognize them, there are no official data on the number of freelancers or people on part-time contracts, which means that many journalists, writers, photographers, videographers, educators, translators or designers are practically invisible.

The only step towards some kind of recognition came in September last year with the passage of a law on research and innovation recognizing freelancers working in the field of innovation for local and overseas companies. The law provides tax breaks, but such freelancers must be registered with a state commission that has not yet been created.

Dragan Cabarkapa, founder of DevClub, an association of software developers, said it was in the interests of the state to encourage such people.

“In a country with a high number of unemployed, the government should encourage freelancers because they are looking for jobs on their own, sometimes under very difficult conditions,” he told BIRN. “It should encourage freelancers and bring them some benefits, because only qualified and educated people can strengthen our economy.”

Protests force a U-turn in North Macedonia

According to the trade union federation, around 180,000 freelancers out of a total of around 700,000 employees, including photographers, IT experts, translators, musicians, non-governmental organizations and around a third of the country’s journalists, are in North Macedonia.

While freelancers are required to pay 10 percent income tax, there is hardly any labor law regulation in the sector.

In 2015, the then government, led by the opposition party VMRO-DPMNE, tried to raise taxes for freelancers to 35 percent to cover health and social security contributions, sparking protests from fixed-term contracts and casual workers.

The government resigned, but the problem re-emerged in 2018 when the Social Democratic-led government at the time tried to impose additional VAT on freelancers who were earning one million denar [16,200 euros] or more per year. Those who did not want to pay for it, said the then finance minister Dragan Tevdovski, should instead put 27 percent of their income into a pension and health insurance fund.

This time, the uprising was mostly expressed on social media, where users argued that making $ 16,000 a year hardly makes a person rich. However, it never materialized when the government withdrew the introduction of a progressive tax rate and Tevdovski resigned in early 2019.

Darko Dimovski, the head of the Macedonia Trade Union Federation, SSM, said freelancers and temporary workers face great uncertainty.

“They have almost no social or health protection,” he said. “For many employers, freelancing is also a cover to hire employees on fixed-term contracts rather than employing them entirely. And now these workers are at the greatest risk of losing their jobs and incomes due to the current economic crisis caused by the pandemic. “

The Bosnian authorities are deaf to the demands of the professionals

Freelancers in Bosnia and Herzegovina face a similar situation.

In December last year, the tax authorities in the Republika Srpska, one of two bodies in Bosnia, invited those who work freelance for foreign companies to report their income, although unlike Serbia, id did not threaten to tax them retrospectively.

In the other entity, the Federation, the tax authorities asked freelancers to pay their tax debts in April 2018 and the situation remains unsolved.

For two years now, members of the Bosnian Freelance Association have been campaigning for lawmakers to change legislation on labor and tax policy.

“Institutions in Bosnia and Herzegovina have not yet officially recognized the potential of this category of workers,” said the association’s vice-president, Elena Babic-Djakovic.

“Representatives of parliamentary parties are very often not even familiar with the concept of freelancers, which makes it difficult to determine the status of freelancers and slows down the work of the association in improving their or our status.”

New proposals for the Income Tax Act and the Contribution Act have entered the parliamentary process because the Babic-Djakovic Association is not satisfied with them.

Based on online platforms on which freelance services are offered and sought, there are around 15,000 freelancers in Bosnia. The real number is almost certainly higher.

Most of them work in the IT and creative industries, in marketing, in advertising and in consulting. This includes developers, online educators, designers, copywriters, journalists, translators, independent photographers and videographers, editors, trainers …

“Most freelancers earn average salaries sufficient to cover the cost of living in Bosnia and Herzegovina,” said Babic-Djakovic.

“But there are also those with longer work experience, a larger list of contacts or customers and a larger market who can earn a few euros every month. Since Bosnia still does not have a register of freelancers or official statistics, it is impossible to determine the average monthly or annual salary, and while some freelancers make really low incomes, there are people who receive significant amounts as well. “

Babic-Djakovic said that despite the contribution of freelancers and the fact that they are not a burden on the state, her association is struggling to enter into dialogue with the authorities in Bosnia.

“Apart from a few written replies from the Treasury Department, our government initiatives are being completely ignored,” she told BIRN.

“All of our members are people who live in Bosnia and Herzegovina and work for customers all over the world. You’re bringing in money here. They pay bills, rent. You study. They raise and support their children. You are sure to raise a new, larger generation of freelancers whom we must give the right to live and work in their country in order not to flee from it. “