Why do you expect (or even insinuate) that I don't know that all countries tax income on residents working there? Of course they do. It actually is a bit more complicated than that, but never mind.
For freelancers (or as a small self-employed entities, which is how freelancers often are legalized), tax usually does not amount up to nearly half of their income. For regular employees this isn't all that unusual, but there are clear distinctions between employment and freelancing.
I find it hard to believe that a Serbian company would pay employment tax if they hire a freelancer, as you claim. Are you really sure about that?
Hiring a freelancer usually means that it is essentially a business-to-business relationship, leaving things like tax, insurance, pension, etc up to the freelancer to take care of. Failing to do that is of course a violation of the tax code, but it doesn't make somebody an employee all of a sudden. I don't think a business is even legally allowed to contract a freelancer unless that person has some kind of legal registration for that. So it would not just be the freelancer that is in violation, but probably also the business contracting them (it could even be an economical crime, for the unfair competitive advantage it might provide).
I guess that the crux here is that the Serbian government decided that anyone who didn't register themselves as a legitimate freelancer (agency, in your words), yet still received income from abroad, will now be treated as if this income was from employment.
Of course these people should pay tax, no doubt about that. But, unless these people are really actual employees and not freelancers (even if they failed to register appropriately), I don't see why they should (or even can) be charged as if they are employees. Other than "might makes right" and "just because we say so".
If all these people calling themselves freelancers are in fact legitimate employees working somewhere abroad, then I completely agree with your logic. However, if that's the case, then there is another snag. The various tax treaties between those countries and Serbia usually dictate that tax will only be charged in one of the involved countries, and usually in the country of employment. But, I'm pretty sure that those foreign companies in most cases did not treat these people as employees (because they'd pay far more) and instead treated them as freelancers. So this likely a moot point.
Maybe I'm still seeing this all wrong, but to me it appears that the government is conveniently classifying these people as regular employees, just because that happens to be a group/classification for which they can charge the highest amount of tax.
For me it is really odd that a freelancer (legal or illegal) can somehow become a regular employee when they fail to register. If anything, I would expect that they be people who have illegal been operating as an business entity. Dealing with that is whole different matter. Potentially dragging in criminal justice and not just tax code. I suspect the government would quickly shoot itself in the foot with that, so maybe that is why they are taking this route instead?
I believe I understood everything you wrote and don't disagree with it (besides what you wrote about a company hiring a freelancer). However, I really don't get how employment and freelancing can somehow be bunched up as if they are the same. But that is what I get from your story and the media. For a company contracting any work force, be that employees or freelancers, it certainly never is.
I only said that the tax rates in question are the same for social security, and the income tax rate is effectively 16% (20% of 80% after 20% expense deductions; with proposed 43% of expense reductions, it's 20% of 57%, or 11.4%), which is not too different from the 10% income tax on employees. They are claiming the law doesn't recognize them, whereas in fact, it does, and the rates are worse than for employees. Which is why they should have registered.
Note that expenses are supposed to be business expenses, and if you've got much bigger real business expenses, they will be accepted (article 57 of the law: https://www.paragraf.rs/propisi/zakon-o-porezu-na-dohodak-gr...).
> I find it hard to believe that a Serbian company would pay employment tax if they hire a freelancer, as you claim. Are you really sure about that?
Serbian company is obligated to pay for any taxes that a non-company owes (income, social security) because they usually have an accountant and a physical person doesn't. If these freelancers were working with Serbian companies, all the taxes would have been paid for them.
This is not "employment tax", it's just that the same or similar rates are applied.
I am not an accountant, but I've been in this boat in Serbia ;-)
It was always an obligation for the recipient of the income, if the payer is not a company in Serbia, to self report those taxes.
The rates were similar to how employees are taxed.
Does not matter how other countries do it, Serbia always had clear laws governing how taxes should be paid. I know that because I paid those myself in 2011 before registering as a self-employed entity (agency) and later a ltd (doo) company in order to reduce my tax burden.
FWIW, all countries tax all income for their residents, at similar or higher rates. Serbia is not too bad, and the proposed taxation rate for back taxes is actually quite low.
"Freelancers" are not some magical fairies, they are simply people earning money without a registered company being involved. Again, if a freelancer had a Serbian company as a client, that Serbian company would have the obligation to pay the taxes on their behalf. Otherwise, it is their duty to self-report any income using a PP OPO for since at least 2001.
One can also be regularly employed and have some side gigs which they would also have to self report to the Tax Office. The only benefit then is that social insurance taxes are added up and one needs not pay a total social insurance taxes larger than what it'd be for 5 times an average Serbian salary.
Any Serbian accountant would have shared as much.
For freelancers who have that as their main source of income, Serbia has had (and still does) extremely low tax rate with self employment entities (agency) unless you are actually in what amounts to an employee relationship. When I looked, I could not find any country in the world that had <10% taxes on gross income up to 4500 eur a month that included social insurance (health, pension and unemployment insurance).