Analysis
Fall 2017 / Issue 55
Analysis
Fall 2017 / Issue 55
AmCham Comments on Public
Finance Reform Priorities
This fall, the Macedonian
Ministry of Finance recently
released its Public Finance
Management Reform Pro-
gramme 2018-2021 (PFMRP)
and invited stakeholders from
government, the international
community, business and aca-
demia to discuss its contents
in an open forum, facilitated by
the cabinet of Finance Minister
Tevdovski. AmCham Director,
Michelle Osmanli, attended the
session and submitted written
comments, highlighting the fol-
lowing issues members have
identified over the years, which
relate directly or indirectly to this
sphere:
We echoed calls to signifi-
cantly increase the trans-
parency of the payment
practices of budget users
toward its private sec-
tor contractors, as well
as their timeliness. Late
payment by budget users
toward companies here
contributes significantly
to liquidity problems in the
country. Starting in 2016,
the Law on Financial Dis-
cipline applies fully to all
budget users, however
the MoF never provided
evidence that institu-
tional payment practices
have improved (e.g., a
trend analysis). Given
the State’s obligation to
monitor itself in this pro-
cess (up to and including
fines issued to the Minis-
ter of Finance his/herself),
transparency of public
payment practices is a
key missing element that
needs to be addressed.
26
AmCham Macedonia Magazine
Michelle Osmanli,
Executive Director,
AmCham Macedonia
We recommended that reform efforts include measures
aimed at preventing blatant and long-term abuse of private
contractors who have delivered public works in good faith.
One key legal loophole to be addressed is that the cur-
rent Enforcement Law does not prescribe a methodology
by which judges determine the minimum level of “operat-
ing funds” necessary for municipalities to continue normal
operations (Article 218). In practice, this means that private
contractors who have delivered public works and proven
their right in court to be compensated for their work, some-
times cannot realize this right. In essence, this exception
allows municipalities to operate above the law, avoid set-
tling past debts and continue normal operations, including
issuing new tenders. Thus, we are calling for the definition
of a standardized methodology in the Enforcement Law by
which municipalities’ reserved “operational funds” are to be
calculated in enforcement proceedings.
We called for insufficient budget allocation at the institutional
level to be systematically discouraged, since it can lead
to abusive practices. For example, Public Revenue Office
annual reports from at least 2007 mention “25% of revenues
from discovered and paid taxes and interest” as a source of
financing of the operations of the institution itself. We believe
this constitutes a formal incentive for inspectors to find ways
to increase collections, rather than simply ensuring the law
is consistently applied as it was intended. Inspectors must
never be incentivized in any way to increase “collections”
from companies in order to fill institutional budget needs.
Insufficient budget allocation should also be discouraged
since it prevents institutions from performing the functions
they are required to by law. Budget users that are key to
improving the local business environment, such as the State
Market Inspectorate and the State Office of Industrial Prop-
erty, have operated on funds for a number of years that
are sufficient only to cover basic operating expenses (e.g.,
salaries, electricity). When taken on a sustained basis, this
budgeting approach aims only to preserve State jobs and
maintain the appearance of a functioning organization.
We recommended reforms aimed at improving the predict-
ability of tax and customs duty collection. Greater consis-
tency would benefit both government and companies. This
could be achieved by adopting the latest EU directives and
OECD/UN guidelines and principles related to direct and
indirect taxation (e.g., transfer pricing, anti-avoidance mea-
sures, permanent establishments, taxation of the digital
economy). All such reforms would need to be accompanied
by substantial improvements in the cap