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Govt Adopts Default-Busting Legislation

Ljubljana, 17 February (STA) - The cabinet adopted a legislative package which it hopes will curb widespread defaults on payments on Thursday. Finance Minister Franc Krizanic believes the measures contain strong incentives for companies to make prompt payments of liabilities as well as tighter regulations to prevent abuse.

The package includes a brand new bill on preventing late payments, as well as changes to the VAT act and public procurement act dealing with defaults.

Krizanic said that changes in the VAT system under which companies would only be able to claim VAT deductions for invoices they have paid (and not merely received) will be one of the strongest incentives in this area.

The bill on preventing late payments meanwhile sets a general payment term of 60 days. Public institutions will continue to be bound to paying invoices in 30 days, Krizanic said.

Moreover, the bill envisages the creation of a system of multilateral claim compensations. "We expect that a significant share of claims will be able to go through compensation this way, thereby preventing the snowballing of this burden in the economy, " said Krizanic.

The changes to the public procurement act will meanwhile prohibit the practice of companies registering their subsidiaries as subcontractors in bids for public contracts, with which they sidestepped the scheme of direct payments to subcontractors.

Under the direct payment scheme, first subcontractors in public contracts are supposed to be paid directly by the state to avoid the main contractor from collecting payment and not paying key partners.

But by listing their subsidiaries as first subcontractors companies were able to evade this mechanism and collect the whole payment anyway.

Tackling defaults has been one of the main demands made by small business to the government.

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