Property Taxation Reform in Macedonia Towards 2005

1
Property Taxation Reform in Macedonia - Towards
2005

• Presentation to the World Bank Workshop on
• Innovations in Local Revenue Mobilization
• June 22, 2002
• Andy Anstett

Institut International de la fiscalité
immobilière International Property Tax
Institute
2
Local Government Reform

• Macedonia decentralizing government in interests
  of better governance and under Ohrid Framework
  Agreement that ended hostilities in August 2001
  
• New Law on Local Self Government came into force
  Jan. 1, 2002
  
• Drafting new laws on local government finance,
  property tax and other local taxes fees for
  2005
  
• New local govt territorial division in fall 2003

3
Existing Property Tax System

• Responsibility for administration of all local
  taxes to municipalities in 2005
  
• Currently national public revenue office (PRO)
  administers property tax, but local government
  receives revenue under complex formulae
  
• Existing law has some good features but, property
  tax administration is a mess.

4
Existing Property Tax System

• Disparities in the capacities and performance of
  PRO regional offices
  
• Tax base is poorly defined and poorly registered
  in land and fiscal cadastres
  
• World Bank funding to MK cadastre authority for
  new real estate cadastre
  
• Valuation procedures differ dramatically from
  region to region and are poor
  
• Tax billing and collection are very poor no
  enforcement is done for property taxes
  

5
Towards 2005 - Initiatives Underway

• MoF and four cities have agreed to pilot projects
  in property tax administration 4 regions (25 of
  124 municipalities)
  
• Brokered by ZELS (Association of Macedonian Units
  of Local Self-Government)
  
• Intensive work with the Tax Department of the
  Ministry of Finance in developing and passing a
  new property tax law by Oct. 2003
  
• In 2004, rolling out the models of property tax
  administration developed in the pilots, in line
  with the new law, effective January 2005, to all
  other jurisdictions for 2005 taxation

6
Towards 2005 - The Property Tax Pilots

• Municipalities have desire but not the staff
  resources or infrastructure to take over local
  taxes property, transfer, inheritance gift
  
• Bureaucratic delays in getting started - MOU
  signed May 30, but contained surprise expansion
  of scope to include all communal (utility) fees
  and charges
• Delegation agreements under article 23 of law on
  Local Self-Government between mayors and PRO
  delayed - week of June 23?
  
• Delays in getting access to records at cadastre
  and Ministry of Interior
  
• Delays in printing 2003 tax bills

7
Towards 2005 - The Property Tax Pilots

• IMPLEMENTATION
• Governance issues - city / region steering
  committees of mayors
  
• Database comparsions for updating real property
  records new vs. old cadastre issues
  
• Updating movable property records from
  registration data Ministry of Interior issues
  
• Improving real estate market research and
  analysis and expanding application of valuation
  commission data formal vs informal real estate
  markets

8
Towards 2005 - The Property Tax Pilots

• IMPLEMENTATION (continued)
• Tax bill printing and delivery, including
  supplementary tax bills for found assessment
  
• Ending dual claims for residential deduction
• Public information campaign about municipal role
  and municipal benefits
  
• Collection and enforcement issues - including
  reminder notices for unpaid taxes
  

9
Towards 2005 - Proposed Legislative Changes

• Ministry of Finance created working group in
  early June with broad representation
  
• Workshop - June 11 to 14, 2003 proposed
• removal of the property tax exemption for real
  property owned or used by businesses
  
• removal of the property tax exemption for
  construction land - both vacant land and improved
  with buildings
  
• abolition of the movable property tax
• municipal rate setting power within statutory
  ranges for all local taxes
  
• capping the 50 residential deduction

10
Towards 2005 - Proposed Legislative Changes
(continued)

• a new first degree and second degree appeal
  process to be developed by Ministry of Local Self
  Government
  
• abolition of self-assessment
• Valuation Commissions responsible for assessment
  
  
• inclusion of enforcement provisions for local
  taxes in LLSG or LLGF
  
• taxing all state property in private use
• ZELS to be consulted on appropriate ranges for
  communal fees and charges.
  

11
Towards 2005 - The Challenges Risks

• Political momentum behind decentralization is
  hugely dependent on the success of the pilots
  
• Work in pilots presents great logistical,
  analytical and political challenges
  
• Legislative changes increase complexity of
  transition to 2005
  
• For example, end of business exemption creates
  need for sophisticated valuation capacity
  

12
IPTI

• IPTI is an international non-profit organization
  of property tax professionals representing
  government, taxpayers, academia and taxation
  assessment professionals.IPTIs Mission To
  internationally promote and foster property
  taxation and assessment ideals founded upon the
  general principles of fairness and equity within
  the partnership of practitioners, governments and
  taxpayers

13
IPTIs Main Goals

• foster equity and exchange of ideas within the
  property tax profession
  
• promote dialogue with various professional
  organizations relevant to the tax industry
  
• facilitate provision of timely and innovative
  solutions to internal and external industry needs
  through networking and co-operation among key
  international experts

14
IPTIs Main Goals

• assist "global" companies in promoting fairness
  and equity of assessment
  
• serve as a voice in assessment and tax policy
• educate the tax professionals, government, and
  private industry
  
• promote and facilitate contacts among our
  members