ANALYSIS
Figure 2 - How would you assess the rates of Macedonia’s various taxes and social contributions (in %)? (Q. C17)
Source: CRPM/CSD
business
hidden economy
survey
2014
70
60
58.8%
55.2%
50
40
30
20
10
0
Company tax
VAT
higher than they should be
Profit tax
Personal income Social insurance Health insurance
tax
as they should be
lower than they should be
NA
CRPM/CSD’s report1 based on surveys of the general
population and businesses indicate:
• Hidden salaries remain the most acute concern
- employment income of some 40% of Macedonian employees is at least partially undeclared. Over half of businesses claimed it was commonplace in their sector to sign work contracts that
did not account for the full remuneration actually
paid.
• 7% of all Macedonian employees work without a signed contract and are not paying any social security contributions on their salary.
• Large-scale tax evasion continues to pose a
serious problem for the Macedonian economy
and the social system, particularly as the government tries to increase their compatibility with market economy principles.
In this context, the country’s stubbornly high
unemployment rate (25.5% as of Q3 2015) and
high long-term unemployment rate (around 80%
of the unemployed) suggest that a large share
of the population is engaging in some form of
hidden employment. These undeclared workers
are most likely to be engaged in activities where cash
payment is typical, such as car repair services, selling at
green markets, household repairs and construction, etc.
Nevertheless, official government data demonstrate
that tax compliance of businesses has progressively improved over the past decade, and the
CRPM/CSD report indicates that businesses’ are
1 Shurkov E., Mickovska R. A. (2015) “Monitoring the Hidden
Economy in Macedonia: Trends and Policy Options.” Available at:
http://www.crpm.org.mk/?p=14289
generally satisfied with the
tax rates with the exception of
the company tax (see Figure 2).
However, in the CRPM/CSD surveys, one-third (1/3) of interviewed
business representatives confirmed
that manipulation of VAT and other
accounting tricks to avoid paying
taxes are common in Macedonia.
Moreover, VAT returns are
often significantly delayed,
creating an additional burden
on companies in the formal economy.
Another issue highlighted in the
report is the quality of procedures
and public officials whose work
directly influences businesses. Of
those surveyed, 1/3 are partially satisfied; 1/3 are partially
unsatisfied; 1/4 business representative said they are very unsatisfied with the
quality of laws and administrative procedures
that directly impact business. The reason could be
related to the perception of more than half of company
representatives that laws are partially (27.5%) or
to a large extent unpredictable (26%) and they
have become more unpredictable during the past three
years (the opinion of half of survey respondents).
Additionally, there is the perception that the business sector is only sometimes (40%) or never (24%)
informed in advance concerning the laws and regulations that influence its work. Even when informed, the
government only sometimes (41.1%) or never (28.6%)
takes the opinions of businessContinued on page 34
es into consideration.
Winter 2016
Issue 48 11