HOW ŠOLAK BECAME THE RICHEST SERB: A well-oiled mechanism for sidestepping the law and breaching obligations (9)

In a special series, Kurir reveals how exactly this controversial billionaire fulfilled his 'American dream' in the murky waters of the Balkan transition

Deceiving regulatory bodies by reporting inaccurate user numbers

In addition to violating and sidestepping urban-planning regulations in laying its optical cable network, SBB often employed the practice of not reporting the accurate number of its subscribers from the start of its business operations in Serbia. This was done in order to avoid paying taxes to the state, but also in order to minimize the company's obligations under the Law on Copyright and Related Rights. In a bid to prove that it did not have a monopoly in the market, United Group regularly referred to RATEL's official data in its releases.

However, SBB had for years been hiding the exact number of its users. As a result, it paid less tax to the state and smaller fees to the owners of the channels, with copyright holders whose works were broadcast getting a similar sort of treatment. Associations like SOKOJ, OFPS, or children's interest channel ULTRA reached an agreement with Šolak's company either after years of court proceedings or by persistently pressuring SBB to pay author's fees according to the actual number of its users and not a reduced one. For example, it was only after years in trial that SBB recently agreed to pay SOKOJ a multi-million compensation for hiding the exact number of its users and refusing to pay its due to this organization.

When SOKOJ filed a lawsuit, during the trial that followed it was discovered that the contracts between SBB and collective organization for the protection of copyright and related rights contained a provision on banning retroactive verification of user numbers. SBB had been doing this for years owing to the support it received from RATEL, which acted like SBB's service and not an independent regulatory agency. This is illustrated by RATELS's official correspondence, in which the agency replied to a concrete question regarding SBB's user numbers by saying that it was true that SBB did not report the accurate number of its users and that the deviations could be as high as 100 percent or more. This means that SBB reported only one half or even less of its actual userbase.

On the other hand, as a state-owned enterprise, only Telekom had the obligation to report accurate user numbers in the market. This was an additional unfair treatment of the state-owned operator. At the same time, private cable companies were hiding a considerable percentage of their users, which constituted tax evasion, as well as reducing the amounts due under copyright which were calculated based on user numbers.

This is why Serbia was designated as a country in which the authorities turned a blind eye to breaches of the law committed by privately-owned cable operators, whereas in most other countries regulators impose strict market rules, especially with respect to network expansion. The fact that users are issued internal receipts (i.e. non-fiscal receipts) for payments made at this provider's branches raises more suspicions regarding the number of users that SBB reports to the relevant authorities. This leaves room for malpractice involving funds paid in this way, which could end up in the grey market rather than in the company bank accounts. That is precisely why it was possible for SBB to be paying to the state up to three times less tax than Telekom – which had a 15-25-percent market share – at a point when its market share stood at 55 percent.

COMING UP NEXT: Various models devised for machinations aimed at increasing SBB's revenues