New solutions on municipal finance are contained in the Draft Law on Local Self-Government Financing for which public hearings are coming to an end. ZOCG has appealed to this Draft.
ZOCG is not satisfied with the solutions that defined that for making decisions on their revenues, they must obtain a consent by the Government, then by way of the distribution of money earned on the basis of personal income tax, as well as the deprivation of money they have been cashed in on the basis of compensation for use of the sea property.
The draft law completely violated the right to autonomy of local self-government proclaimed by the Constitution, the European Charter on Local Self-Government and the Law on Local Self-Government, since there are provisions that oblige the municipalities to obtain the prior consent of the Government when deciding on the introduction of their own revenues in accordance with these and special laws. The independence of the municipality is fully limited in creating an effective tax policy and creating a business environment for quality economic development at the local level, in accordance with the law established by the competencies and the strategic development goals. This norm could not have survived the verdict with the Constitutional Court. The legislation of the countries in the region does not know this norm," ZOCG said.
According to the draft law, the state intends to give the municipalities in the north of the state the money from the tax on income of persons which goes in the state’s register and which was charged in that municipality. For northern municipalities with less than 3,000 inhabitants, it is envisaged to receive 70 percent of the income tax paid by the persons in their territory. ZOCG estimates that in this way, municipalities from the central and coastal regions are put in an unequal position and they propose to gradually increase this income for them until it reaches 50 percent as predicted for the north.
"The constant increase of the competencies of local self-government, without the provision of funds for their exercise, as well as the increase of the number of inhabitants in most of the municipalities of the central and coastal region, and therefore the need for increasing expenditures for infrastructure and utility equipment, clearly show that it is necessary to establish a higher percentage belonging to income from personal income tax and to these municipalities as well," states ZOCG. Their suggestion is that the income from the coastline and central region will gradually increase in the period from next year to 2022.
"If the Ministry of Finance considers that there is no room for determining the percentage of personal income tax of 50 percent for all municipalities, we suggest considering the possibility of determining a certain percentage of VAT revenue to municipalities," ZOCG suggested. ZOCG has indicated that it is satisfied that new solutions will partly affect the improvement of its financial situation, primarily through higher revenue from personal income tax revenues, the establishment of the Revolving Assistance Fund for co-financing projects from the EU, by enhancing the criteria for the allocation of money from the Equalization Fund. Most municipalities in recent years are in a difficult material situation, and some of them have been blocked. The Government decided in 2015 to allow municipalities, their public companies and institutions to reprogram their obligations towards the state because of the difficult financial situation. The repurchase agreements were signed with the municipalities of Bijelo Polje, Berane, Danilovgrad, Pljevlja, Rožaje, Plav, Budva, Bar, Nikšić, Žabljak, Kolašin, Mojkovac, Ulcinj, Savnik and Cetinje.
According to the Draft Law, the state also intends to deny money to the municipalities on the coast if the money they used to receive on the basis of the compensation for the use of the sea property and direct it entirely to the Public Enterprise for Sea Management. According to the Ministry of Finance's estimate, this is revenue of around 3.5 million euros per annum. ZOCG finds it problematic that at the same time, municipalities on the coast do not provide adequate compensation for lost revenues, nor reduce the scope of their jurisdiction.
ZOCG considers that the Ministry of Finance needed to carry out a detailed analysis of the effects of proposed decisions per each municipality. "It was to be expected that during the drafting of this law, the Ministry of Finance will carry out a detailed analysis of the effects of the proposed solutions individually per the municipalities, which will be an integral part of the material being submitted to the public hearing. Such an analysis should not show a reduction in the revenue of any municipality if the conditions for establishing an adequate legislative framework will provide financial sustainability and good municipal financial capacity by balancing local government revenue with their jobs and legal obligations are sought," considered ZOCG.
Text by Marija Mirjacic, on October 3rd 2018, read more at Vijesti
