[spery]

What happened is that basically noone was paying any tax because the Tax Service did not have a way to classify internet workers. You can't pay taxes if you don't know how much you need to pay.

Bigger issue here is that they are forcing the people to play for the preceding 5 years, and taxes include both health insurance (which those people could not receive) and retirement fund (which those people are not eligible for those 5 years).

But Serbian government as a whole is deeply corrupt and this surprises noone.

[elmo2you]

Additionally, from what I've figured from the media reports on this, it's not just about this retroactive tax demand.

It's also about the level of tax they will have to pay going forward, which appears to be stupendously height (at least for freelancers). It appears on par with, or even higher than, what people with regular employment often pay, in countries with elaborate and functioning social security/welfare systems. Serbia certainly does not appear to have those.

It does appear as if this government really does not want freelancing to be a viable option. Considering the recent efforts to attract foreign investments into local Serbian (tech) companies, where almost insane return-on-investments figures are being promised (of course flowing back to the foreign investors), with all kind of questionable perks (pretty much destroying any potential competition from local businesses), it's not impossible that there is an orchestrated scheme going on here.

It sadly would not be a new phenomenon if/when in Serbia a small group of shot-callers are manipulating anything and everything to just enrich themselves, by collaborating with questionable (and ultimately abusive/destructive) foreign enterprises, at the expense of Serbia's citizens and in fact the country as a whole.

But, we'll see what happens.

[levosmetalo]

> It does appear as if this government really does not want freelancing to be a viable option.

This is the key. Freelancers earning their living on the internet are not inherently dependent on government and are much more likely to support opposition and fight back against the corrupt government.

It's easy to control people working in overblown administration or public/government sector, or in companies working for them, but controlling free financially independent people not afraid of dying of hunger if they oppose is not that easy.

[necovek]

Corruption and incompetence have been the "standard" of the Serbian administration for a long time, regardless of the political party in power.

The current goverment is just milking the ones caught breaking the law because of the economy being cash-strapped and well... because they can!

I still think it should be fair to offer them the best terms under which they could have incorporated (eg. for anyone with under 4.500 EUR a month it'd be self-employment with fixed rate taxation that was available to anyone), but to pretend that protesting freelancers were not breaking the law is dishonest imo.

[necovek]

> It's also about the level of tax they will have to pay going forward, which appears to be stupendously height (at least for freelancers). It appears on par with, or even higher than, what people with regular employment often pay,

That's not true either.

Proposed changes (not accepted by the protesters) are to consider 43% of income as non-taxable personal deductions (up from 20% in the existing law, though actual, receipt-backed deductions for performance of work are accepted), and then pay the regular tax percentages that employees pay, except that Serbian law splits the employer and employee obligations for employees, but charges the sum total of those tax rates in percentage points to freelancers (eg. see the numbers on https://taxsummaries.pwc.com/serbia/individual/other-taxes — so freelancers would pay 25.5% of the taxable income into the pension fund).

A total cost of a single employee for an employer is considered a gross contractual salary (out of which employee taxes are paid from the link above) + employer taxes on top. So because of the slightly lower "base" calculations are done on, actual percentages are slightly lower for employees, but it was basically negated with the 20% deduction. With a 43% deduction, freelancers get to pay fewer taxes than state gets for a single employee for the same net salary.

Eg. if a freelancer ends up with 100k RSD after all taxes, state gets 36k RSD in total taxes: 36k out of 136k gross is not "stupendous" at all! An employee receiving a net 100k RSD salary, state gets around 66k RSD in taxes. If existing law was upheld, it would be around 60k RSD for freelancers (iow, much closer to what employees are paid for).

[elmo2you]

I'm not quite sure what you are trying to get at.

It appears you are explaining how the Serbian government wants to tax freelancers as if they would have been regular employees. Which other country does that? Where do self-employed people (freelancers) get taxed as if they are employees?

This assumption appears to be underpinning your whole comparison/explanation. Where did you get this assumption of "freelancer should be treated as employee" (as far as taxing goes) come from?

If it wasn't clear from my original sentence, I meant that this tax rate for freelancers is on par with what employees in OTHER countries often pay (if not higher). But I honestly don't know a single country that taxes freelancers as if they are regular employees.

Could you give me examples of other countries that do this, and what the rational behind such an unusual approach might be?

[vladvasiliu]

> Where do self-employed people (freelancers) get taxed as if they are employees?

In France, for example.

There's no actual concept of "Freelance" here [0]. Legally you're either an employee or you have some form of "company". An "independent" is basically someone running a company of one. But it's legally still a company.

If it's an "individual enterprise," you pay income tax and social security just like an employee. That's basically your revenue minus an allowance (40% I think but I'm not sure).

If you're a regular company, you'll either pay yourself a salary, in which case you pay almost all the taxes as a salaried person does (except for unemployment, which you don't get if your business falls through) or you pay yourself through dividends, in which case you pay a corporate tax (on the company's profits) + income tax (on your dividends). Even though there's a social security part levied on the dividends, you don't actually get anything in return. You're basically considered as someone who doesn't contribute to social security (no retirement and only basic health care — basically emergency). However, for any program that has an upper limit on income, your dividends are taken into account. So no social housing for you.

---

[0] There's no such thing as "freelance" in France. There are some jobs that are more or less close, but they're related to show-business. For the purpose of the IT sector, there's no such thing as "freelance".

[necovek]

Serbia has long had laws how any income not tied to employment is taxed.

It was always an obligation for the recipient of the income, if the payer is not a company in Serbia, to self report those taxes.

The rates were similar to how employees are taxed.

Does not matter how other countries do it, Serbia always had clear laws governing how taxes should be paid. I know that because I paid those myself in 2011 before registering as a self-employed entity (agency) and later a ltd (doo) company in order to reduce my tax burden.

FWIW, all countries tax all income for their residents, at similar or higher rates. Serbia is not too bad, and the proposed taxation rate for back taxes is actually quite low.

"Freelancers" are not some magical fairies, they are simply people earning money without a registered company being involved. Again, if a freelancer had a Serbian company as a client, that Serbian company would have the obligation to pay the taxes on their behalf. Otherwise, it is their duty to self-report any income using a PP OPO for since at least 2001.

One can also be regularly employed and have some side gigs which they would also have to self report to the Tax Office. The only benefit then is that social insurance taxes are added up and one needs not pay a total social insurance taxes larger than what it'd be for 5 times an average Serbian salary.

Any Serbian accountant would have shared as much.

For freelancers who have that as their main source of income, Serbia has had (and still does) extremely low tax rate with self employment entities (agency) unless you are actually in what amounts to an employee relationship. When I looked, I could not find any country in the world that had <10% taxes on gross income up to 4500 eur a month that included social insurance (health, pension and unemployment insurance).

[necovek]

That's not true at all. There was no classification needed at all to pay taxes, and how much should be paid was clear, and the requirement was to self-report on these taxes. I know because I've paid those taxes at exorbitant rates at one point which are now being retroactively reduced (by retroactively changing normalised expenses from 20% to 43% which are deducted from taxable income)!

There were (and still exist) problems with pension fund contributions being recognized, but that's more on the pension fund to figure out (I've got 11 months of payments from 2011 that they are not registering because of this, which is why I switched to self-employment then).

But this is also ignoring the fact that all these years until early in 2020, Serbia had an extremely low-tax mode of operation for such workers: self-employment with taxation on a predetermined fixed "income" up to an actual yearly income of 6 million RSD (~50,000 EUR). For IT workers, who had the biggest tax rates in those arrangements, it was not more than 400€ a month, which is pretty amazing for up to 4500€ of gross income. This arrangement only required registration with the tax office and business registry that you are operating a self-employment agency.

Sure, those at the lower end or irregular income wouldn't benefit from it, but Serbian government is already mostly forgiving their debt for anyone with less than 500€ of monthly income, and spreading the debt over 10 years, which are the terms protesters are not accepting.

I also think it'd be acceptable to offer the same taxation rate to anyone who would have been eligible for self-employement fixed-tax if it is more beneficial, and the accumulated interest would be the only "penalty" for skipping taxes.

That way people who did pay taxes wouldn't feel disadvantaged over the ones who avoided them.

[spery]

You're right on most parts, I'm not as well informed as I thought I was, but I think you're going with assumption that all the freelance folk should have registered 'agencies' and worked with that. That wasn't an option for everyone.

Most of the freelancers I know only did occasional gigs (most were either students or designers) and having to pay for monthly tax wasn't really an option as they didn't make that much.

People with 'agencies' have no tax debts, so they aren't really the issue here.

[allie1]

I fully agree with all your points, but it still doesn’t make sense to me that they need to back-pay for health insurance as one of the regular welfare payments, when they haven’t had the opportunity to use it during that period.

[necovek]

Well, if they've paid it on time, they would have had an ability to use it. :)

Generally, taxes for public services are paid even if you don't use them — it's the nature of the beast. Many people with decent income in Serbia almost exclusively use private healthcare because of the annoying see-a-GP-to-be-scheduled-to-see-a-specialist-in-several-months dance, yet they are obligated to pay for it.

But sure, it still feels bad for whoever has to pay (it's like a car loan that you want to pay off, and you still owe more than what the car is worth at that point: feels terrible, but that's your legal obligation).

[allie1]

I was under the impression that for freelance income it was only a personal income tax. What you are referring to is for employees: https://en.m.wikipedia.org/wiki/Taxation_in_Serbia

Are freelancers considered employees here?

[necovek]

Income tax rates apply to any income from work, including contracted temporary work (including specifically "authorship works" which IT services generally fell under and which get 20% "normalized expenses", though if your actual costs are higher, you _can_ document expenses instead). Method of calculation is slightly different because of expenses and treatment of gross income, but rates are the same by law.

They are, however, not treated as employees (which have a lot of protections like minimum hourly wage, maximum working hours, maximum daily and weekly overtime hours, minimum number of paid vacation days, sick leave coverage at 60% of salary...). For freelancers, this does cause trouble with the pension fund employees not wanting to count your contributions toward your pension, but it depends heavily on who deals with processing your forms.

[necovek]

And to further clarify, as early as 2008 when I looked at it first, social insurance payments were required at the same rates employers and employees pay, with the main benefit being that if you already have other income (eg salary), your total social contributions should are capped at 5 times the average (eg if you've got a 3x the average salary, and a side gig getting you another 3x the average salary, you'd only be paying self-reported social insurance taxes on the extra 2x average salary).

[necovek]

Btw, this problem is endemic to all public services in Serbia. If you skip your self-registered healthcare payments for 6 months, you won't be able to use the services, but government will still charge you until you pay up, instead of voiding your contract.

I agree this should be fixed elsewhere too, not just in the case of back-taxation.