On the eve of the upcoming Forum “Mechanisms for the Elimination of the Gray Economy, Implementation and Expected Results” within the USAID project “Partnership for Better Business Regulation”, which will be held on May 16th in the h. Aleksandar Palace, Skopje, BusinessRegulatura.mk made an interview with Danela Arsovska, President of the Macedonian Chambers of Commerce, who are organizers of the Forum in partnership with the chambers of the project. At the High Level Forum will be attended by domestic and foreign experts, ministers, directors of institutions, science, business community, who will detect the biggest challenges of the companies in the fight against the gray economy, will offer solutions for its suppression, and the effects for the economy and the state from reducing the shadow economy and putting unregistered entities into the state system.
BusinessRegulative: What is the current state of the gray economy in the country? What is the trend?
Arsovska: Suppressing the informal economy in the country, which is over 30 percent of the overall economy, is the main challenge for ensuring a stable business environment and working under equal and fair conditions for all private sector entities. With the current conditions of impact, especially small and medium-sized enterprises, which make up 99.7 percent of all companies and have a share of 70 percent in gross domestic product as a driver of the Macedonian economy. In the analyzes of the Macedonian Chambers of Commerce, which represents over 20,000 members from all sectors, a continuous demand for coordinated action is in order to deal with one of the biggest challenges for the economy, the gray economy. It is particularly critical to provide a mechanism for dealing with those working in the informal zone with millions of profits, producers, traders of goods and services that earn large sums, without paying a penny in the budget. For registered companies, this is fatal because they are difficult to deal with the pressure because unregistered entities have more competitive products and services, which are taken over by a larger share of consumers.
BusinessRegulation: What are the consequences of the growing gray economy in the country?
Arsovska: According to the analyzes from the Chambers of Commerce of Macedonia Chambers of Commerce, those who do business without formal registration of their activity, ie without a company, are more than 50% more competitive on the market than the registered companies, because they do not contribute with the obligation for the payment of VAT, social and pension insurance contributions, the current costs are much lower because they do not pay an industrial tariff, which not only damages the budget, but also offer prices for products and services on the market that mean ing lower prices registered company that pays all the taxes can not achieve because the higher costs must be calculated in the final cost.
BusinessRegulation: What should be done to change the current situation?
Arsovska: Guided by the current business environment in the country, in conditions of announcements of registered entities for recourse to the informal zone, it is necessary to relax the entities that are registered from inspection supervisions in order to reduce the trend towards a quiet transition to the gray zone. Joint action and utilization of the appropriate mechanisms is necessary in order to change the perception that the informal is a safe zone where there are no controls and penalties. Otherwise, those who work in accordance with the laws and pay taxes will quietly begin to transit to the gray zone.
Mechanisms for overcoming this state of affairs with the will and action of the inspection services is to start with continuous actions on applications for unregistered entities, but also public display of those who will receive a fine for this, because not only their evasion of the regulations is tax evasion, but rather is a disincentive for everyone who wants to work by respecting the laws.
The proposed initial steps to tackle the shadow economy are necessary to demonstrate a clear will that there will be consequences for those who work unregistered, and not as if only registered firms are at stake.
First implementation in practice of the Law on Prohibition and Prevention of Unregistered Activity, which would regulate the work in the gray zone. Commencement of the procedure for transformation of informal activities into formal, more precisely voluntary registration in the first phase of controls for those who are unregistered, and therefore their entry into the system of obligations. In the second phase, if the first entities refuse to register and cease to operate in a gray zone, repressive measures should be applied by imposing significant fines and criminal sanctions, which would try to prevent institutions from countering illegal money flows.