North Macedonia is improving local tax system with the assistance of Slovak experts

Slovakia is the first country to provide North Macedonia with know-how and experience in property taxes administration and collection. Local taxes and fees were broadly discussed during the study visit to Slovakia by tax and financial experts from North Macedonia that took place from 28-29 November 2019.

Since 2004, the state administration has been decentralized in NorthMacedonia. “In the field of property taxes, it is necessary to update and unify legislation in order to improve the system and collection of taxes at local level. Nowadays, most of the local governments tax revenues are from property transfer tax compared to Slovakia, where majority of revenues comes from annual property tax, ”pointed Irena Vasileska Shalevikj from the Ministry of Finance of North Macedonia.

The study visit was a part of the Slovak Ministry of Finance (MFSR) and UNDP – Public Finance for Development project, which helps to share Slovak knowledge and experience in public finance management with partners.

Marek Kulka, Head of Local Taxes and Fees Unit at the MFSR and project Administration of Local taxes in North Macedonia team leader stressed that on the international level there is no unified principle for local tax collection. Thus, to set a proper system, it is necessary to know respective country background and specifics including legislation and relations between central and local government.

As the property tax collection in North Macedonia is very low, a comprehensive analysis of current municipalities´ competencies and capacities is needed in order to identify and ensure internal resources to avoid the dependence on central government resources. Macedonian experts confirmed that on top of low payment discipline, property tax is not enforceable in case of low-income citizens. To improve the public awareness on local taxes and requested payments, a national campaign is envisaged.

Macedonian  Ministry of Finance, the Association of Local Municipalities, Capital City of Skopje, the Public Revenues Office and the Cadastre Agency representatives met not only with Slovak ministry colleagues. In addition to exchanging practical information on self-government financing sources and structure, they visited the Digitalization Data Centre of Local and Regional Governments of Slovakia, the City of Bratislava and the Client Center of the Ministry of Interior. They were informed about submission of electronic tax statements, their processing, electronic decisions on levying the tax issuing and the tax enforcement procedures in case of tax evasion or insolvency.

Particularly remarkable for the Macedonian guests was the Digitalization Data Centre, which currently provides 138 eServices for the citizens. “It is a very good project and we hope that with Slovak support we will be able strengthen the electronization of self-government in North Macedonia,” said UNDP national expert, Professor Borche Trenovski from the University of Skopje.

According to Trenovski, a joint UNDP-MFSR project helps the Macedonian government analyze public revenues and expenditures at local level, and in particular, the efficiency of property tax collection. “The visit to Slovakia is very beneficial for us, especially in view of Slovakia’s progress in public sector reforms at the local level and especially in the local property tax collection,” Trenovski said. The property tax collection in Slovakia is more than 99% thanks to reforms, well set tax procedure, the method of determining the tax base, the of tax administrator’s competences, and electronization.

Apart from taxes and fees collection there are ways how to increase revenues and save costs and human resources of municipalities. International expert on public finance   highlighted the importance of entrepreneurial activities, services outsourcing or joint initiatives that may bring additional savings.

Overall, the MFSR presented the unique Slovak model of property tax administration and collection in the context of municipalities´ original competencies and their right for self-financing. Two solutions that North Macedonia could follow have been proposed. The value principle for property taxation with mass property evaluation by automated means or property taxation based on technical units as applied Slovakia. The Slovak ministry is ready to assist North Macedonia further in order to achieve sustainable tax revenues in municipalities.