25th March 2021, Skopje – Better services to the citizens and strengthened accountability as regards the spending of public funds by the municipalities will provide for continuation of the fiscal decentralization process. Funds transferred to the municipalities through block grant, as well as on other basis, will be increased, also leading to enhanced financial discipline aimed at reducing the arrears and cost-effective operations, Minister of Finance, Fatmir Besimi, said in his interview for “Economski Magazin” show on Alsat TV.
Thereby, he talked about the activities and the measure to be undertaken for the purpose of enhancing the fiscal capacity and increased municipal revenues, strengthened fiscal discipline and transparency and accountability of the municipalities.
“Improved fiscal capacity and increased municipal revenues will be implemented through activities which envisage increase of the funds distributed to the municipalities on the basis of collected fees in the central Budget, increased own revenues of the municipalities and establishment of funds to support the good performance. To that end, revising the methodology on distribution of funds on the basis of taxes and grants to the municipalities will be discussed”, he said.
In fact, as the Minister said, it is envisaged for the percentage of PIT revenues distributed to the municipalities, collected from individuals with permanent or temporary place of residence in the respective municipality, to increase gradually. Furthermore, amount of VAT grants will gradually increase in line with the municipalities’ performance. Accordingly, Performance Fund and Equalization Fund are envisaged to be established.
“Municipalities showing positive performance and higher own revenue collection will be unlocked funds from the Performance Fund, while municipalities with lower revenues, but also showing fiscal effort and good performance in collecting their own revenues will be unlocked funds from the Equalization Fund, he said, adding that establishing the Performance Fund should be a careful process of transition with a support from the central government institutions in order to strengthen the local fiscal authorities in the municipalities showing significant underperformance as regards this component, sometimes through no fault of their own fault.
Activities will be also undertaken towards increased municipal own revenues by improving the efficiency of the administration and determining new local revenues in line with the EU good practices on service quality, as well as enhanced criteria on distribution of funds for transferred competences in the field of primary and secondary education, culture, child care and care for elderly and firefighting.
To the end of strengthening the financial discipline of the municipalities, arrears repayment and cost-effective operations, activities are envisaged aimed at measures for planning the actual revenues and expenditures of the municipalities, rationalizing the operations and reducing the unnecessary expenditures, regular servicing of arrears, strengthened financial discipline, procedures on declaring financial instability and analysis of the existing arrears of both the municipalities and the public enterprises.
As the Minister announced, it is planned for the municipalities to be able to issue securities as one of the measures aimed at reducing the municipal arrears towards the private sector.
Besimi underlined that government oversight will be strengthened, in particular by the Department for Public Sector Financial Inspection in terms of the Law on Reporting and Recording Liabilities and reporting non-compliance with the Law on Financial Discipline, measures will be adopted with respect to increased transparency at the municipalities by announcing the financial reports in a transparent and understandable manner, and activities will be undertaken for the purpose of strengthened accountability when using budget funds.
Public consultations and discussions will soon follow, in coordination with the Working Group entrusted with the continuation of the decentralization process, established by the Government, with the Ministry of Political System, Ministry of Finance, Ministry of Local Government and ALGUs as its members.