For the past two years, under the pressure of lockdowns brought about by the Covid-19 pandemic, the pressure of competition from multinational companies to small and medium-sized enterprises, shows that the only way to survive is through mergers.
Small and medium-sized enterprises in Europe are those that operate with 1 to 50 employees. The governments of the EU member states believe that the backbone of their countries’ economies, such as small and medium-sized enterprises, should be merged to form larger corporations in order to survive and have easier access to bank lending.
For their part, of course, governments hope that with this incentive policy for mergers of small and medium-sized enterprises, such as tax deductions in the new corporate scheme of 30% -40% for five consecutive years, they will reduce tax evasion and combat it, when cash bleeding caused by VAT reaching, in some member states, up to 3% of GDP per year.
The right policy
Small and medium–sized enterprises due to their small size and flexibility can turn their disadvantages, such as lack of competitiveness, extroversion, earnings and tax capacity respectively, into advantages if a digital, equal and friendly business environment is constantly formed for them, in the business environment of the economy in which they operate.
If EU member governments want to help small and medium-sized enterprises develop in their countries, they should adopt the following policies:
• Mobilize so that the available resources are available, through the banks, and always through the lending and financing tools.
• Law-Bills with tempting tax breaks that will have a progressive character, such as 50% reduced tax for new corporations after mergers and for a period of five years, and 11% thereafter for a period of three years.
• Subsidized social security contributions for the first three years.
• Generous arrangements of overdue debts to the tax authorities and the social security funds in the long run, with 200 to 240 installments.
• Prerequisite for an analysis of economic geography and priorities according to concentration, industry, activity, employment and debts, so that debts are not amalgamated but there is a sustainable perspective.
• The approach to be taken when taking the process for a merger or partnership between small and medium-sized enterprises should follow a process as with a new investment coming from abroad.
Conditions for the transformation of small and medium-sized enterprises
• The total average turnover of the business transformation based on the last three years, should be at least equal to 150% of the turnover of the business with the highest average turnover of the transformed companies in the last three years.
• The turnover of the new company, ie the sum of the turnover of the latest financial statements of the transformed companies to be greater than or equal to 1.5 million euros and depending on the size of the economy of the member country.
• Each of the companies that will be merged to create a new type of legal entity, the legal entity, must contribute to the share capital of the new Legal Entity under establishment an amount equal to at least 10% of the share capital. The share capital of the new legal entity that will be created and depending on the size of the economy of the member country, can not be less than the amount of 100 thousand euros for the smallest economy of an EU member state.
• In the event of a merger, the cooperation takes place through a contract or agreement in the field of contract farming, each of the cooperating producers contributing quantities of products equal to at least 40% of the total quantity of similar or similar products of its production.
