AmCham Macedonia Summer 2017 (Issue 54) - Page 25

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: AmCham Macedonia Magazine 25