You seem to be misunderstanding a few things: nobody is treating them as employees, they are "contractors", and this concept was there since forever in Serbian law. These "freelancers" paid no taxes even if they were required to self-report their income.

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 ;-)