I n  the  last five  or six  years,  there  has  been  an  unusual practice  in  Serbia  -  failure  in  paying  invoices  for  purchased goods or acquired services on time. This ‘pattern’ originated from large wholesalers that paid their suppliers five or even six months late. Soon after, utility and public companies followed in their footsteps. Small and me-dium enterprises and entrepreneurs were being owed money by  retail  chains and  public  enterprises for over 200 das, so thousands of businesses had to
close down. Such behaviour became rampant with the onset of the economic downturn in Serbia, so buyers tried to justify it by saying that they didn’t have enough money as they were also  forced  to  allow  their  consumers  to  pay  for  purchased goods through deferred payment. Public and utility companies said that others also owed them a great deal of money, which amounted to much more than their own debt. Eff orts invested by the business community and the Serbian Association of Employers in trying to make the government  implement  measures  and  force  defaulters  to  settle their financial obligations didn’t yield any results. That was until  the  European  Union  adopted  a  special  directive  according to which payment of invoices by companies, the pri-vate  sector  and  all  other  commercial debts had to be settled
in no longer than 60 days. In the case of the public and state sector, the deadline is 30 days. This directive  will  come  into  force on the 1st January 2013 and is applicable  to  both  EU  countries  and  countries  that  aspire to  become  EU  members,  including  Serbia.  CorD  is  talking to  the  President  of  the  Serbian  Association  of  Employers, Nebojša Atanacković about how to implement this directive and  what  activities  the  government  is  going  to  undertake when it comes to settling liabilities on time.

 

- From the moment the EU directive was drafted, we knew that, due to the situation on the Serbian market pertaining to settling liabilities, the full implementation of the directive would not be possible. Hence, we have made a proposal for the payment deadline to be 60 days. Last year, the payment terms were up to 240 days, so shortening that period to 60 days would be a big win for us. The late payment of invoices happens  in  the  EU  too,  especially  in  the  state-run  sector. In certain member countries, being late with a payment is treated  as  a  criminal  liability,  which  is  punishable  with  a prison  sentence.  Every  state  has  measures  to  penalize  defaulters and these measures are much more austere than in our country.Atanacković  also  says  that  certain business  associations  in  Serbia  have
joined  the  initiative,  so,  last  autumn, the government adopted a bylaw which stipulated payment terms of no longer than 60 days. However, as it turns out, this  law  was  non-binding  and  applicable on a voluntary basis. The public sector immediately came up with calculations on how it couldn’t be  expected  of  them  to  be more  payment  efficient  unless businesses and citizens paid  their  electricity,  water and gas bills on time.

- All in all, the bylaw is still not  being  implemented  in practice.  In  the  meantime,  we  found  out  that  a  law  is  being  written  that  would  solve  the  problem.  We  are  pleased to hear that we are going to have a law that will deal with the issue so we off ered help to the Ministry of Economy and Regional  Development,  which  has  prepared  the  draft  Law on Financial Settlement Deadlines. The text of the law contains  a  proposal  according  to  which  all  liabilities  between companies have to be settled within 60 days providing that
the companies have not agreed otherwise.

 

■ Are you happy with the solution and when do you expect this law to come into force?

-  The  public  debate  is  pending  and,  according  to  what  we have  heard,  parliament  is  supposed  to  adopt  the  law  by March. Also, an additional two months would be needed to carry out the preparations for its implementation so the law should finally come into force in May. If everybody adheres to the deadlines, the law could even be adopted before the elections.  However,  if  everything  is  postponed  for  the  autumn, then this year will be lost when it comes to enforcing regular  payment  which  means  that  the  ‘big’  will  continue living off  the ‘small’.

■ According to the information you know of, could you tell us  why  big  companies,  like  retail  chains  and  public  and utility companies, are not more conscientious in settling their liabilities?
-  If  you  don’t  pay  for  something  on time,  then  you  are  using  that  money for free. Instead of these default companies  asking  for  a  bank  loan  if  they are  short  on  working  capital,  they choose not to pay for goods or services and use that money as a form of a loan but without interest rates or other related expenses. Since a small company doesn’t have enough capacity to force its  large  buyer  to  pay  for  goods,  it  is then forced to turn to banks and   borrow   money,   while paying    exuberant    interest rates. This is the only way for them to pay their taxes, state contributions,  salaries,  their partners etc. Therefore, they do this while they can, which is  usually  for  a  few  months. After that period, they are forced to declare bankruptcy or liquidation, they have to fire their employees and, without any revenue, they become a burden to the state. There have been  tens  of  thousands  of  such  examples  in  the  last  few years. Nobody helped them and, what’s even worse, nobody reprimanded large companies for their behaviour.

■ Do you know of any examples where liabilities were settled in court?
- Yes, that happened too, but everybody quickly gave up on it. A lot of time goes by while a small company waits for a court to pass a sentence, and, while waiting for the sentence, it usually has to declare bankruptcy. Court proceedings are extremely  lengthy,  and  big  companies  have  enough  means to  drag  them  out.  Small  companies  find  legal  proceedings very  expensive,  particularly  if  they  have  to  wait  for  a  long time for a verdict. But they do like the solution offered by the draft Law on Financial Settlement Deadlines. The law says that courts will have to be fast and efficient in their decisions since they will have to abide by the urgency rule. As we have been told, the relevant courts will have to launch proceedings within a week or two at the most. On top of that, I have to underline that penalties for the persons and companies responsible that are defaulting, are very severe indeed. The responsible party will have to pay a penalty that ranges from 50,000 to 150,000 dinars,  and  the  penalties  for  companies ranges from 5% to 20% of the unsettled amount, in addition to the legal expenses that they will have to pay.

■ Who is going to supervise the implementation of this law?
- The plan is for Tax Administration to do that,  particularly  in  the  cases  of  public companies being late in settling invoices issued by private businesses. This makes sense since the tax authorities have the information on whether taxes and other financial obligations are being paid. The idea for the banks to control the payment of taxes and related obligations was wrong to start with. A big mistake  was  made  when  the General Accounting Office was abolished. The Office did not allow for a single salary to be reimbursed  without  companies
first  paying  taxes  and  other contributions. Now, companies are  paying  these  financial  obligations  whenever  and  however they like. The list of debtors, which was released by the Tax Administration, revealed a lot and it is quite interesting to see the names of the companies and individuals who are on it and are not as well known as certain bankrupt banks. Even  when  you  look  at  these  ‘smaller’  unsettled  amounts,you cannot help but feel that so much money has been wast-ed. We are all wondering how is it possible to tolerate these companies  not  paying  their  financial  obligations  for  years and their owners not being adequately punished.

■ Do you think that a lack of proper laws is the main culprit for such latency in payment and misuse?
- In our country, the old system was rapidly replaced with a  new  one,  and,  in  the  process,  relevant  institutions  have not  been  formed  and  regulations  drafted  that  would  aid that transition. In such situations, the weakest and the most honest are the first to go down. The ‘big players’ always find a loophole. Our privatization and overall transition is painstaking, and a lot has been needlessly destroyed with nobody coming up with new solutions. This is very conducive to the corruption that is spreading throughout our society. I cannot
understand why a company, which hasn’t been paying taxes and contributions for years and pays its employees in cash, is still able to have a huge turnover. Then, all of a sudden, it is  forced  to  declare  bankruptcy  and  its  owner,  now  a  very wealthy person, sets up a new company and starts ‘looting’ the  state  all over again.  We cannot  say  that  there  were  no laws to regulate such activities and their executors.  Of  course,  we  had  laws,  but they were not implemented and nobody exercised any control. The culprits were not penalized and the persons responsible  for  supervising  the  whole  situation simply  failed  to  do  their  jobs.  How  can I not suspect foul play when the people who should have controlled the process were probably bribed not to do so!

 

■ What about political affiliations and friendships?
-  Yes,  there  is  that  too.  In  our  country, governing parties are becoming increasingly important. If not on the state level, then  in  towns  and  local  communities, municipalities    and    counties. And while they bicker publicly, secretly they are watching each other’s   backs   i.e.   “Leave   my friend  alone,  and  I  will  leave yours.”  That  is  also  a  form  of corruption - a political one. The state’s  lack  of  care  is  inexcusable  since  we  are  not  talking about a relation between two people or two companies but the country’s economy, thousands of people losing their jobs and the state budget bleeding money. The state is obtaining loans  left,  right  and  centre  and  pushing  us  all  deeper  into indebtedness, as opposed to exercising better control over its assets and making our lives easier.

■ We often adopt laws that closely resemble those in the EU, but we fail to implement them. Could the same situation happen with this law too?
- If Serbia’s state authorities continue behaving in this way then the law will become yet another dead letter. If that happens, we need to openly admit that this is a lawless country and  that  everything  is  resolved  through  force.  Every  citizen needs to know that the electricity or gas they consume needs to be paid for, just like the Electric Power Industry of Serbia (EPS) needs to pay the company that lays electrical cables.  We  have  exhausted  all  the  opportunities  to  obtain new  loans.  We  have  to  turn   to  ourselves  around  and  start ‘cleaning up’ our country. ■