Project description

Title: Reform of value-added tax and procedural tax law in line with EU standards
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Macedonia
Lead executing agency: Macedonian Ministry of Finance
Overall term: 2009 to 2011

Context

In 2001 the Macedonian government and the European Union (EU) signed a Stabilisation and Association Agreement (SAA). As a precondition for the country's planned accession to the EU, Macedonia has undertaken to gradually transpose the acquis communautaire (the entire body of EU law) into Macedonian law and to apply it according to EU rules. The EU Commission's 2009 progress report notes that Macedonia has not yet made any progress in harmonising value-added tax and that some rates of excise duty are below the minimum stipulated by the EU. The tax laws in question are comprehensive and complex bodies of law. Experts in the Macedonian government do not have the required knowledge of European directives to be able to transpose them into Macedonian law by their own efforts. Also, the country lacks independent tax advisors to advise citizens and the private sector. So far, only tax officials have been available to provide such advice.

Objective

The Macedonian value-added tax law and procedural tax law is harmonised with the European directives.

Approach

Advisory services provided within the context of the project focus on those areas addressed in the EU Commission's reports and the Macedonian Ministry of Finance's need for consulting services.

A German-Macedonian working group is elaborating entire draft texts for the value-added tax law. They include the amendment of the Macedonian Value-added Tax Act and the adaptation of the universally applicable Value-added Tax Ordinance and internal administrative guidance on value-added tax. The focus is on implementing the European directives on value-added tax. Rules that are not compatible with the system or impractical rules must be eliminated or corrected. With regard to the Tax Code, a German-Macedonian group of experts is drafting a bill and associated sublegal regulations and administrative provisions on the basis of an expert report.

Results achieved so far

Value-added tax and the Tax Code in Macedonian tax law are being brought into line with the relevant EU directives. The taxpayers' legal position is also being improved as a result. This means that the Macedonian Government, the parliament, the administration and judiciary have to switch from thinking in terms of an authoritarian state to treating taxpayers as partners.