AmCham Macedonia Winter 2018 (Issue 56) - Page 25

Winter 2018 / Issue 56 AmCham News & Events AmCham Comments on Macedonia’s 2018-2020 Economic Reform Program The European Commission invites all enlargement countries to prepare annual Economic Reform Programmes (ERPs); Macedonia, along with all other Western Balkan countries and Turkey, submitted its first ERP in January 2015. This activity is meant to help candidate countries and potential candidates to enhance their economic policy and its governance. AmCham Macedonia was invited to review and comment on a draft of Macedonia’s 2018-2020 ERP. As was the case with the previous year’s review, AmCham members felt the proposed program did not adequately address the areas they felt were most relevant and in most urgent need of reform attention. Given the limited time we had to com- ment on the Program, we have limited our feedback to just two subsections of the document (4.3.1 Public Finance Management and 4.3.4: Business Environment). Comments on Subsection 4.3.1: Public Finance Management Though not explicitly stated as a desired goal of neither proposed reform Measure 1 nor 2, we would welcome any and all reforms aimed at increasing the transparency of the payment prac- tices of budget users toward its private sector contractors, as well as their time- liness. Late payment by budget users toward companies here contributes significantly to liquidity problems in the country. The Law on Financial Discipline applies fully to all budget users, however there is no evidence that institutional payment practices have improved. Given the State’s obligation to monitor itself in this process (up to and including fines issued to the Minister of Finance itself), transparency of public payment practices is a key missing element that needs to be addressed. Another important reform along this line would be to define a standardized methodology in the Enforcement Law by which municipalities’ reserved “oper- ational funds” are to be calculated in enforcement proceedings and introduce other measures that prevent blatant and long-term abuse of private contractors who have delivered public works in good faith. The current Enforcement Law lacks a methodology by which judges deter- mine the minimum level of “operational 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, sometimes cannot realize this right. In essence, this exception allows municipali- ties to operate above the law, avoid settling past debts and continue normal operations, including issuing new tenders. Comments on Subsection 4.3.4: Business Environment and Reduction of the Informal Economy We agree that Government efforts to reform various aspects of Macedonia’s business environment in line with assessments of the Doing Business Report and, to a lesser degree, the Global Competitiveness Report have raised the country’s visibility as an FDI destination in the region. This is proven by an increase in Brownfield and Greenfield foreign direct investment and increased employment in such newly established opera- tions. A limited number of bureaucratic processes have been tangibly improved, which has helped the businesses that utilize them. Unfortunately, the measures included in the draft 2018-2020 Program are limited to very small investment in a long talked-about e-government services portal. (. While we would echo the need for continued investment in e-government systems these mea- sures are insufficient and cannot be considered fundamental reforms. Instead, concrete and tangible reform is needed in a number of fundamental areas that would create positive change in the business environment overall. These reforms should include measures to: Foster real, open and systemic dialogue with industry via proper use of the National Electronic Register of Regulations (ENER), placing a moratorium on the use of the “short procedure” in Parliament and extending the standard public comment period. Reduce the grey economy by ensuring enforcement institutions’ responsibilities are properly set, do not generally overlap with one another and that they are properly trained, equipped and motivated to tackle this problem systematically, throughout the territory of the entire country. Reduce regulatory confusion by ensuring official, consolidated legal texts are published more regularly, reducing conflicts between new laws and existing leg- islation, and requiring enforcement institutions to publish official, legally-binding guidance on the application of laws in concrete cases; General alignment of the tax (Corporate Income Tax and Value Added Tax) leg- islation with the requirements of the global digital transformation and alignment with the global taxation. This would contribute to the ease of providing elec- tronic services and doing e-commerce in Macedonia, as well as to the overall transparency and revenue collection Increase the predictability, consistency, fairness of inspections by increasing the scope of the Inspections Council’s work, increasing the transparency of all State institutions that carry out inspections; increasing the transparency of fine issuance as well as instructional material to help companies increase their compliance, and eliminating incentives for inspectors to increase collections; Increase transparency and oversight of company appeal mechanisms; and Ensure para-fiscal charges, taxation and penalty policies are rational and fair For the full text visit AmCham Macedonia’s Website - Advocacy News Section. AmCham Macedonia Magazine 25