4th August 2022, Skopje – Ministry of Finance started redesigning the taxation system in the country. Process of comprehensive tax reforms is aimed at providing just, efficient, transparent and contemporary tax system based on modern digital technologies and innovations as regards taxation, all to the end of attaining an accelerated, inclusive and sustainable economic growth. On Thursday, the Draft concept was presented by Minister of Finance, Fatmir Besimi, together with the Directors of PRO and the Customs Administration, Sanja Lukarevska and Slavica Kutirov to the business community. Meeting was attended by representative of all Chambers of Commerce in the country.
“Today, we launched a public debate about the tax reform concepts, which together with the public finance reforms, will contribute to more effective and more efficient budget revenue collection which revenues, being actually the citizens’ money will, in the most efficient and transparent manner, be used for rendering better-quality services to the citizens, Minister Besimi said, adding that this speaks in favor of the Government’s capacity to work on achieving several objectives, as being done. Thus, the activities for coping with the ongoing energy crisis and the inflation are coupled by the reform processes as well.
Minister of Finance, during his address, pointed out that North Macedonia has one of the lowest share of revenues from taxes and contributions in the GDP. In the period 2008-2020, significant gap was present between the share of revenues from taxes and contributions in GDP in the EU 27 and in our country. In fact, in 2008, total tax revenues and social contributions accounted for 38.4% of GDP in the EU 27, being higher by 10.7 percentage points compared to the 27.7% share in North Macedonia. Over the years, this gap has been widened, accounting for 13.8% in 2020.
“Tax policy reform concept in the field of profit tax and personal income tax, covers draft legal solutions, revising the preferential tax treatments, disrupting the tax system neutrality. Furthermore, they are geared towards increasing the tax revenues by expanding the tax base and creating fiscal space for pursuing active tax policy, all to the end of encouraging private and public sector investments in technologies, underpinning green transition and digital transformation. All legal texts are simplified and modernized, thus also increasing the transparency and the efficiency when implementing the regulations by the taxpayers and the administration,” Besimi pointed out.
Concept, setting the dynamics of conceptualization and implementation of the reform, is based upon the five priorities defined in the Tax System Reform Strategy (2021-2025). These are the following: greater fairness as regards taxation; greater efficiency and effectiveness of the tax system for improved revenue collection; increased tax transparency; better quality of services, and affirmation of an environmentally-friendly tax policy. The concept, which is in a draft version, was developed on the basis of comprehensive and thorough analyses of the existing tax system and the best European practices, through a transparent and inclusive process. Also, when conceptualizing the proposed solutions, recommendations from international organizations such as IMF, World Bank, OECD and EU were taken into consideration. Inclusive approach continues by presenting the concept before the public, all to the end of determining solution acceptable for all involved parties.
Tax reform covers profit tax, personal income tax, Valued Added Tax, excise duties and environmentally-friendly tax policy, with the most of the foreseen legal changes planned to be applied starting 1st January 2023. Solutions are foreseen, which will contribute to expanding the tax base by targeting the preferential tax treatments, i.e. tax exemptions and reliefs in the existing system related to profit tax, personal income tax and VAT. Tax incentives are envisaged to be revised, thus creating fiscal space for pursuing active tax policy, all to the end of encouraging private and public sector investments in technologies, underpinning green transition and digital transformation. As regards VAT, the changes pertain to further strengthening of the fundamental principles of the VAT system, as well as detailed clarification of the rights and the obligations of taxpayers. Debate will also cover the PIT-related issue in the light of progressive taxation and the flat tax.
Proposed solutions pertain to the need for ensuring greater vertical and horizontal righteousness of the tax system, and expansion of the tax base by reducing the tax expenditures. This reform will also contribute to reducing the informal economy, i.e. its formalization and eradication of the tax evasion will provide for increased tax revenues, better-quality services from the institutions, as well as greater social security for the citizens.
The reform implementation will also contribute to higher share of revenues in GDP, and thus better-quality services in the public sector, improved infrastructure, education, health, digitalization and green transition, competitiveness of the economy and accelerated and sustainable economic growth.