efficient_combating_the_informal_economy.doc

These companies rise out of nowhere operate about two

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these companies rise out of nowhere, operate about two to three years, win several engagements via public bidding procedures (or merely one large engagement) and later vanish from the market into thin air. These companies take up contractors and construction workers either illegally or based on the performance agreement and also rent complete mechanization, which usually just stands at the construction site unemployed, from other larger construction companies. Furthermore, it occurs that these fictitious companies hire various firms as subcontractors, which then operate for years basically acting as intermediaries between employers and contractors, whereas in that period, 10-15% of contracted business value disappears. Such phenomena in building and construction sector could be avoided if the public tender procedure permitted parttaking only to companies with relevant references, specified number of permanent employees and with annual turn that is not lower than the public acquisition value. Third place includes services, mainly small-size subcontractor services and so-called household services. Service sector has the largest ratio in the informal economy of EU countries, for it is extremely difficult even in such developed countries to fight against illegal rendering of services. However, governments and local self-governing administrations of EU countries are constantly conducting programs for reducing the informal sector and struggling to keep the level of illegal services under control by enforcing active measures. The Republic of Serbia lacks active policy for coordinated stimulation and more severe sanctioning of the informal service sector. For this reason, legally operating employers who render their services to both national economy and citizens suffer pressure from unfair competition, which encumbers their business operations and jeopardise their market development, whereas the republic budget suffers substantial loss in assets each year by the realization of significant overall revenues in the informal sector. 39
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Fourth place is held by the only branch of industry, in which the Republic of Serbia shows surplus in foreign trade exchange – agriculture with forestry and water management. Different estimates indicate that each second small-size agricultural manufacturer in Serbia carries out its business activities in the informal sector, which represents significant loss for the state on one hand but on the other, hinders these individuals to receive relevant subventions from the state or apply for a loan to purchase seed, compost, agricultural tools and mechanization, leaving them long-term limited to their modest compounds and their undersized production, causing them to lose opportunity for development and improvement of life standard. The consequence of such circumstances is massive migration from the country and to the cities, where former small manufacturers now for the most part work illegally or take up seasonal or part-time jobs which
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