Bad Law on Accounting causes collapse in the economic system

For the first time in almost 50 years, 374,000 companies, entrepreneurs, associations and other legal persons that operate in Serbia cannot file their annual financial reports and regularly finish the last business year.

Business Register Agency has postponed the deadline for filing of financial reports for one month, but even now it is certain that it will be impossible to file the reports even after that deadline, as the Law on Accounting, introduced in 2013 and its 7 sub-regulations are impossible to apply in practice.

In October 2014, Business Support Network, in cooperation with Association of Accountants and Auditors of Serbia and largest German investors in Serbia warned that the bad Law on Accounting, based on the cancelled EU legislation and contrary to the International Accounting Standards is threatening to endanger the economic system of the country. However, the representatives of the Ministry of Finance that have written this Law chose not to react at the time.

In the past weeks, hundreds of companies and entrepreneurs, their accountants and accounting agencies contacted BSN with the information that the costs of implementing the new Law on Accounting are huge, and the Law itself is impossible to apply in practice, and that they do not know how to close the accounting books for 2014.

This kind of collapse of the system is a responsibility of bureaucrats from the Ministry of Finance who, during the drafting of the new Law on Accounting in 2013, stubbornly refused to listen to the appeals of the business sector and professional accounting association not to introduce the law, as it is too expensive for the failing Serbian economy, overly-bureaucratized and impossible to apply in practice.

Direct consequences of this behavior are:

– 250 billion EUR of costs for the economy to implement the new Law

– Serbia became a black spot on the face of Europe, as the business results in Serbia are not comparable to the results in EU and surrounding countries.

– Bloated financial reports (three times the size of previous one) cause additional uncertainty in the business environment and will increase the effective costs of crediting, due to the increased risks.

– Law on Accounting enables false presentation of business results, increasing the possibilities of frauds and criminal activities.

– Law significantly increases the difficulty of doing business for foreign companies whose general managers are foreign residents, as it obliges them to receive a temporary ID in order to sign the financial reports, which in turn requires a lengthy and unnecessary procedure.

– Main consequence of this Law on Accounting will be the drop of Serbia on the Doing Business list of the World Bank and reduction of interest among foreign investors.

Due to all listed, Business Support Network publicly appeals to the Minister of Finance, Mr. Dusan Vujovic and the Prime Minister, Mr. Aleksandar Vucic, to suspend the implementation of the 2013 Law on Accounting and to allow all business subjects and other legal personas to file the financial reports for 2014 according to the previous 2013 regulation, which would avoid the collapse of the economic system.

It is necessary for the Government of Serbia to urgently form a new workgroup for the new Law on Accounting, that would include representatives of professional accounting associations and leading business associations, in order to draft a Law which conforms to the International Accounting Standards and reduce the possibilities of frauds.