ANALYSIS
... Social Contributions Fiasco
continued from page 17
In January, the Government began tweaking
these policies again. They
doubled the amount of contributions-free monthly
freelance income to about 300 euros per month and
proceeded to completely remove the ~3.000 euro
cap on gross salaries above which social contributions
were not owed. The latter move met with uproar from
the business community and prompted a third change,
returning the cap to 6.100 euros. AmCham Macedonia
made an official request to the Public Revenue Office
inquiring as to how many people in Macedonia collect
a monthly gross salary higher than 6.100 euros, but has
not received a response. Informed estimates range from
about 20 – 50 people in total.
Today, 5 months after the first changes came into force,
and after 3 legislative amendments and the delayed
release of detailed instructions and procedures by the
responsible state institutions, the dust seems to be settling on this issue. Companies are now required to report on all payments made to contractors on a monthly
– rather than an annual – basis. They are not required
to make social contribution payments on
their contractors’ behalf, as initially feared.
Unfortunately, contractors who have paid
social contributions on their non-employment related income have yet to receive
any official statement from the Pension
Fund confirming the existence and status of
their accounts. Starting in January this year,
the Pension Fund began issuing regular contributions reports to all payers (employers
and individuals). Unfortunately, the first reports unleashed a wave of complaints due
to their inaccuracy. The Fund recently announced that its next reports – due out in
June – will be better, since in the meantime
it worked to improve its reporting system.
Other impacts –such as those promised by officials and
those feared by protestors from the beginning – are still
unclear. However, it is telling that a number of government programs now release employers from the obligation to pay social contributions on their employees’
behalf (e.g., the Employment Services Agency program
encouraging employment of 18-25 year olds). Thus,
indirectly, they recognize that paying 24% of every salary toward social contributions can actually discourage
legitimate employment.
Unfortunately, the social contributions fiasco is part of
an increasing trend of laws being adopted with substantial financial impact on companies accompanied by little
or no public consultation or warning. While officials
probably anticipated a big reaction to this change, it
didn’t have to be so painful. Most business people accept that tax rates are a political decision made by government in relation to state budget needs – this is the
“why” part of the equation. Involving companies in the
“how” part of la