TAX IMPLICATIONS OF CRISIS THE CASE OF MACEDONIA

OECD

Sofia

10-11 June , 2010

TAX IMPLICATIONS OF CRISIS

THE CASE OF MACEDONIA

2

Introduction of flat rate system

Reduction of tax rates

Broadening the tax base

TAX POLICY MEASURES IN 2006

3

Tax rate was 15%

Tax incentives and relieves:

Accelerated depreciation up to 25% of tax base:

- Technologic modernization

- Purchase of the environmental protection assets

Tax base decreased for investments in fixed assets

up to Eur 100,000

Tax relief in proportion of the foreign capital invested

for the next three years (at least 20% participation)

PROFIT TAX

4

Full tax relief if 100% foreign capital is

invested

50% tax decrease for start-up companies

Tax relief for companies initially listed on the

stock exchange:

- 30% in the first year

- 15% in the second year

PROFIT TAX

5

PROGRESSIVE TAX RATES

Up to 2004:

15% and 18% brackets

From 2005 - 2006:

15%, 18% and 24% brackets

PERSONAL INCOME TAX

6

Zero rate tax for reinvested profit

Depreciation not tax deductible

REINVESTED PROFIT

7

Effects

strong performance of the revenues

There are more tax declarations submitted in

2008 compared to 2007 for 6,78% which

implies that more companies where subject

to profit tax

Financial result stated in the tax

declarations is higher for 74,5% in 2008 than

2007 which says a lot about a profitability of

the companies

8

VAT

Strong performance in the first half of 2008

Effects of the oil price growth

9

Last quarter in 2008

Revenues started to decline

Becoming aware of crisis

10

Last quarter in 2008

Banks were not hit

Good mortgage coverage

Real economy

Orders were stopped

Export going downward

Import as well

Industrial production declining

11

Anti-crisis measures

Companies started to complain

Asking for tax relaxation

12

Anti-crisis measures

Measure for introduction of non-taxation of

profit not distributed

Political decision – policymaker problem

13

Anti-crisis measures

CIT

Designing the corporate tax system

Taxation at the moment of dividend distribution to

non-resident companies or to individuals

Taxation of expenditures not recognized for tax

purposes

14

VAT

The general rate of 18% for a certain supplies has

been shifted into preferential rate of 5%

computers

irrigation of water

flats

Filing of the VAT returns has been deferred

15

PIT

Tax revenues did not decline

Gross salary concept

Food and travel allowances included in the gross salary

Integrated collection by the PRO

16

2010 performance

Q1

Tax revenues are on the level of 2009 but not

meeting the Budget plan

Budget facing troubles

Increasing the tax rates or introducing new

taxes?

17

2010 performance

Expecting the reduction of public expenditures in

the Budget Supplement

Expecting the second half of 2010

Projected increase of GDP between 1 and 2%

18

GDP MOVEMENT

19

TAX REVENUES MOVEMENT

0

5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

2001 2002 2003 2004 2005 2006 2007 2008 2009

PERSONAL INCOME TAX

PROFIT TAX

VAT

EXCISES

TAX REVENUES STRUCTURE IN 2009

VAT

57%

EXCISES

22%

Personal Income Tax

14%

Profit Tax

7%

21

Questions!