12th March 2022, Skopje – Legal solutions under the set of measures adopted by the Government this week, pertaining to reduction of both VAT and excise duty on basic food products and fuels, enter into force, which are to provide for reducing the national retail price index as expected by the citizens.
Today, Minister of Finance, Fatmir Besimi, together with the Director of the Public Revenue Office, Sanja Lukarevska and the Customs Administration Director, Slavica Kuturov presented the adopted amendments at the press conference, thereby underlining the significance of the prompt response by all institution involved in the process of their adoption and application, upon being adopted by the Parliament last night.
Minister pointed out that under the legal solutions, VAT on basic food products will account for 0%, 5% VAT rate on electricity will continue to be applied throughout 2022, as well as 10% preferential VAT rate on fuels, with the excise duty on fuels being reduced by Denar 1, Denar 2 or Denar 4 per liter, as per the stock market trends.
He explained that the VAT rate on basic food products reduced from 5% to 0%, will apply by the end of May, pertaining to bread, sugar, flour – type 400, sunflower cooking oil, long life milk with a fat content of 2.8%, 3.2% and 3.5%, fresh meat, rice and eggs. This measure, as Minister pointed out, will provide for putting a downward pressure on retail prices of these products, thus also reducing the value of the consumer basket, and so as for the impact therefrom to be more substantial, it will be carried out in parallel to the measure for freezing the prices of these products. Fiscal implications thereof amount to Denar 430 million.
Extending the application of the 5% VAT preferential rate on electricity of households by the end of 2022, was a measure adopted last year aimed at protecting the living standard of citizens by cushioning the price shocks from the rising electricity price on the global stock markets. Minister said that this measure amounts to Denar 2.7 billion on annual basis.
He went on that the Government will also recommend the introduction of block tariffs so as to reach lower electricity price for smaller consumer, ensure greater energy efficiency, as well as provide lower costs for low-income households.
Measure for reducing VAT rate from 18% to 10% on energy sources, i.e. unleaded gasoline, gas oil, liquefied petroleum gas and methane, is geared towards protecting the purchasing power of final consumers, as well as small-scale farmers. Fiscal implications thereof amount to around Denar 400 million.
Lower excise duty by Denar 1, Denar 2 or Denar 4 will also have additional effects on the fuel price. “This, as Minister said, will directly impact the retail price of these energy sources, thus reducing by around Denar 1.2, i.e. Denar 2.3, i.e. Denar 4.7 in line with the stock market trends. This measure is worth around Denar 900 million.
In addition, payment of VAT when importing energy sources, is abolished, thus boosting the liquidity of the business sector.
By stressing that the global price crisis is a reality, Besimi pointed out that we should all be aware thereof, with the institutions, the government administration, the traders, as well as the citizens, acting responsibly.
“As a Government, we take proper actions. We adopted measures worth EUR 400 million, aimed at mitigating the pressures on the living standard of the citizens and the economy, being implemented at high speed as evident, Minister said, thereby adding that these legal solutions define the manner in which these measures are to be applied, thus also providing for the institutions’ prompt response in future as well.
He urged the citizens to be cost-effective as regards the energy and not to believe the fake news.
-Another challenge is ahead of us, however, as we all managed to overcome other, even tougher challenges, we will address this one as well, by being responsible and acting in harmony”.
In his opinion, the situation as regards Russia-Ukraine war, is uncertain, however positive developments are expected – European Central Bank expects for the Eurozone to record growth this year, with moderate single-digit inflation in place, being good news for our economy given its exposure to the European one.
During the press conference, the Director of the Public Revenue Office, Sanja Lukarevska said that PRO, in the past period, together with all actors of the society, worked hard as regards the tax-related measures.
“Thus, VAT preferential rate was reduced, pertaining to the following products: bread, flour, sugar, cooking oil, long life milk, rice and eggs, thus directly impacting the final price the citizens are to pay for the basic food products. These products were fully VAT-exempt. This measure provides for saving citizens’ money and preserving the purchasing power”, Lukarevska said.
Director of Customs Administration, Kutirov talked about implementing the measure pertaining to excise duty cuts, thereby stressing that this measure will be implemented immediately upon getting information from the Energy Regulatory Commission.
“Measure aimed at reducing excise duties on the basis of average stock exchange price bring about additional reduction of duties on energy sources: diesel, unleaded gasoline 95 and 98, gas oil (extra-light heating oil). Excise duty will be reduced to Denar 1, Denar 2 or Denar 4 depending on the average stock exchange price set by the Energy Regulatory Commission. Amount of the excise duty will be set twice a month, which will be applied on 1st and 15th in the respective month. Measure will apply until 31st May 2022, Kutirov said.
Set of measures adopted by the Government is estimated at EUR 400 million, EUR 100 million out of which are foregone revenues in the Budget, while EUR 300 million are budget expenditures. They, as it was pointed out at the press conference, will be executed as per the projections.