Date: 19/03/2020

AmCham proposes measures to the Serbian government aimed at reducing the negative impact on the economy of COVID-19

Five general measures to preserve employment and facilitate the faster recovery of the economy

IIn addition to prioritizing the lives and health of our citizens, AmCham has proposed to the Government of the Republic of Serbia initial rounds of measures to reduce the negative impact of the COVID-19 virus pandemic on the domestic economy and preserve as many jobs as possible. The measures have been proposed on the basis of a survey of AmCham members, with comparative measures from 15 different countries, while taking into account Serbia’s financial capacities.

The survey shows that about 2/3 of AmCham member companies consider it necessary for the Government to adopt a set of temporary labor measures and reduce tax expenditure in the field of fiscal policy, in order to preserve liquidity in the economy and the level of employment in a situation of reduced work volume. 55% of companies are already experiencing difficulties, and most of the companies surveyed either expect to see or have already seen sales to decline by 20% to 30% in the first period. The most common problems in business are caused by limited international and local traffic, challenges in work organization, reduced cash flow and interruptions and delays in the supply chain.

AmCham and its members support the efforts of the Government of Serbia and are available in all the priority areas, ranging from supporting the health system to economic measures aimed at preventing and overcoming the effects of a pandemic.

Five general measures

The five recommended general measures have the goal of preserving employment and providing faster recovery after the crisis. The first measure is to reduce taxes and contributions in the case of absence of up to 30 days caused by Corona virus, and the second important measure is exemption from taxes and contributions during work interruptions.

Also, in order to preserve liquidity among companies, AmCham suggests a 50% reduction in 2020 corporate income tax for legal entities and entrepreneurs, with annual payments in the following year. Suspension of interest accrual is proposed for late payment of liability taxes, arising from the beginning of a state of emergency until 30 days after its end, for companies that are already experiencing major difficulties in their business. Applying these two measures will not reduce the company’s tax liabilities, but rather delay them due to the decrease in business activities.

In order to return the economic bloodstream to full functionality, the fifth and final suggested general measure would be to allow cross-border transport of goods and services. AmCham suggests that the Government should urgently begin negotiations on the harmonization of measures with neighbor countries, including EU and CEFTA countries, to provide so-called “green paths" for the circulation of goods in Serbia.

Measures for small and medium-sized enterprises

As the small business sector is the most sensitive part of the economy, AmCham has recommended additional measures for SMEs, including 50% lower taxes and contributions for entrepreneurs, as well as the need to urgently provide loan guarantee schemes designed to maintain the liquidity of affected SMEs.

Proposed measures for sectors that are particularly affected

The proposed measures for particularly affected sectors such as tourism, logistics and the automotive industry include the suspension of the advance income tax payment for 2020, as most such companies are expected to end the year with a financial loss. Given the need to reduce fixed costs, especially in the hotel industry, it would be necessary to reduce property taxes by up to 50%.
In order to secure employment for workers, refunds and partial cover of paid absence costs during work interruption or reduction of workload due to the virus, to be provided by the Government, have also been suggested.

Specific measures for the Health industry

Proposed specific measures for the health sector include the exclusion of drugs that cannot be marketed in a country that falls under the scope of a decision to ban the export of medicines. It was underlined that, due to increased demand, distributors are unable to provide a six-month stock of medicine, but ratger make multiple successive purchases.

Monetary policy measures

In addition to praising the moratorium on the repayment of loans for businesses and citizens, AmCham proposes that the NBS provide an additional injection of liquidity for merchant banks, which could take the form of a reduction of required reserves or expansion of collateral for repurchase agreement operations, or by enabling the use of capital buffers, as well as the appropriate treatment of claims in the moratorium from the point of view of prudential standards.

Simplification of administration

Changes to and clarification of administrative measures have also been proposed, such as facilitating the electronic opening of sick leave and the registration of residence and remote work. AmCham also suggests the introduction of official protocols and measures to protect all employees that are unable to work at home.

Basis for suggested measures

The measures have been proposed on the basis of: AmCham's research on the current and expected economic impact of COVID-19, the limited financial resources available to Serbia and the measures announced by the Government of the Republic of Serbia, and are based on examples of good practice in 15 countries. Measures in Australia, Austria, Canada, China, Denmark, Italy, Germany, Spain, Sweden, Switzerland, Netherlands, the United Kingdom, Ireland, France and Croatia have been analyzed and measures announced in the Czech Republic, Hungary, Romania and Poland have also been considered.

Research methodology on the current and expected economic impact of COVID-19

AmCham conducted a survey on the current and expected economic impact of COVID-19 and the necessary measures using a combined qualitative and quantitative approach.

The quantitative survey included 74 of the 200 AmCham member companies covering 14 sectors, while a qualitative survey was conducted among 40 member companies, who were asked to comment on the results of the quantitative survey, outline key challenges and propose appropriate measures. Almost everyone interviewed as part of the qualitative sample is a CEO of an AmCham member company.