Analysis
Summer 2017 / Issue 54
Local Economists Call
for Corporate Income Tax Changes
Daniela Antonovska, Association of
Economic Researchers
T
he Association of Eco-
nomic Researchers
(AER) is a non-profit
organization that pro-
motes independent
and objective socioeconomic
research and analyses in Mace-
donia. Together with the “Cen-
ter for Tax Policy”, AER recently
organized a debate in Skopje
entitled, What kind of changes
in income taxes are needed?
The main discussion centered
on the importance of controlling
and regulating transfer prices
and inter-company transactions,
tax exemptions for foreign invest-
ments and the importance of
increasing budget transparency
and accountability.
The general conclusion from
the debate was that changes are
needed in the country’s Corpo-
rate Income Tax (CIT) approach.
If introducing a higher tax rate
for companies with high profits is
considered, this should be done
holistically and with extensive
public consultation, analysis and
debate.
Key Speaker Points & Recommendations
Slavko Lazovski (Center for Tax Policy)
2009 amendments to the Law on Corporate Income Tax were made in response
to the global financial crisis and introduced the so-called “Estonian model”. This
meant that accounting profits realized during the fiscal year are taxable only if they
are allocated for payment of dividends or other profit payments.
Tax experts consider the CIT the ‘queen of taxes’, meaning it is the most complex
tax where many details are important, not just tax rates.
EU directives do not have much to say on what this tax should look like, meaning
countries have some freedom in this regard.
Branimir Jovanovic (AER)
Two-thirds of the Macedonian profits are generated by the largest 15 compa-
nies which have monopolistic or oligopolistic market positions and are essentially
extracting social rent. The main reason for this is the low and flat CIT rate. There-
fore, it is necessary to adopt an additional, higher CIT rate for high-profit com-
panies. Funds that will be collected in this way should be allocated for improving
healthcare, the educational system, or to decrease poverty.
Pavle Gacov (Pro agens / Association of Tax Counselors)
The CIT does not currently contribute enough to the public purse. In 2014, CIT
revenues amounted to 5 billion MKD (c.80 mil EUR), in State budget revenues,
while in 2015, they rose to 12 billion MKD (c.200 mil EUR), due to the abolition
of the Estonian model. This is still low when considered as a percentage of GDP:
2.1% before introducing the Estonian model; 0.8-0.9% under the Estonian model;
2% following the abolition of the Estonian model.
Borce Smilevski (Deloitte / Center for Tax Policy)
CIT revenues in Macedonia are not high, because this tax was never seen as a
source of revenue but instead as part of providing a favorable business climate.
The State is a bad businessman and the private sector manages money better.
Generally, the Estonian model should encourage companies to invest. In Mace-
donia, however, it worked as an anti-crisis measure but did not result in increased
investment. That is why Macedonia should not return to that CIT model.
US Business reaffirms commitment to tackling climate change
AmCha m EU members regret the
decision of the President of the United
States to withdraw from the Paris
Agreement. As American businesses
invested in Europe, we remain com-
mitted to working together to tackle
climate change, while creating jobs and
growth. This can be achieved through a
global framework engaging all players.
AmCham EU has always advocated
for a stable and predictable framework
for investments. In our view, the Paris
Agreement provides clear goals as
well as a balanced and cost-efficient
approach to reduce emissions.
Climate change knows no national
borders and dealing with greenhouse
gas emissions requires a global solution.
The Paris Agreement created a global
framework to tackle both the causes
and the effects of climate change. The
EU and the United States have been
instrumental in establishing the momen-
tum for an energy-efficient, low carbon
future, which would ensure a compet-
itive advantage for their companies. At
the same time, the agreement enables
national governments to address their
critical energy security needs in a cost-ef-
fective manner.
Moreover, because of its global nature,
the Paris Agreement helps transform the
global markets for energy-efficient tech-
nologies and provides a reliable and pre-
dictable international structure.
Source: www.amchameu.eu/news/us-business-reaffirms-commitment-tackling-climate-change
AmCham Macedonia Magazine
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