Transcript Document

Finances of Local
Governance in Albania
Ornela Shapo (Këmbora) – Local Economic Development Component Leader
USAID / LGPA
September 2009
Local/Financial Decentralization
• Important steps since 1992
–
–
–
–
Creation of governance at two levels
Signing of European Local Autonomy Chart (1998)
SKDV (1999 – 2000)
Law on Organization and Functioning of LGUs (2000)
• Objective: LGU has sufficient resources and
capacities to accomplish legal functions
• Decentralizatioin based in three directions:
– Institutional level
– Transfer of fiscal authorities
– Empowering financial capacities
LOCAL GOVERNANCE PROGRAM IN ALBANIA
Budget of LGUs and State Budget
•
During a decade, unconditional revenues of LGUs tripled.
– Total of own revenues from 4% of State Budget in 2000 to 11% in 2009
– Revenues from own sources from 1% to 5.5% in 2009
– Unconditional transfers from 2.8% to 5.5% in 2009
Buxhetet e NjQV-ve dhe Buxheti i Konsoliduar i Shtetit
Në mln Lekë
2000
2001
2002
2003
2004
2005
2006
2007
2008
Totali i të ardhurave të Buxhetit të Shtetit
130,642
145,639
154,595
167,224
184,355
204,163
229,444
251,555
291,238
334,823
Totali i të ardhurave të Pushtetit Vendor
Të ardhurat e veta të NjQV
Të ardhura nga transferta e pakushtëzuar e PQ
Të ardhura nga transferta e kushtëzuar e PQ
Totali i të ardhurave të pakushtëzuara të PV
Prodhimi i Brendshëm Bruto
36,387
1,316
3,643
31,428
4,959
523,043
37,699
2,038
4,870
30,791
6,908
583,369
38,287
2,676
9,500
26,111
12,176
622,711
44,105
7,923
6,300
29,882
14,223
694,098
47,432
9,613
6,277
31,542
15,890
750,785
52,635
12,019
7,300
33,317
19,319
814,797
26,226
11,112
15,114
26,226
891,000
26,355
27,526
9,366
11,307
16,988
16,219
26,355
27,526
982,737 1,090,305
36,835
18,412
18,423
36,835
1,173,760
28%
4%
26%
5%
25%
8%
26%
9%
26%
9%
26%
9%
11%
11%
10%
10%
9%
9%
11%
11%
7%
1%
6%
1%
6%
2%
6%
2%
6%
2%
6%
2%
3%
3%
3%
3%
3%
3%
3%
3%
Pesha e PV në totalin e Buxhetit të Shtetit
Totali i të ardhurave të PV në BSh
Totali i të ardhurave të pakushtëzuara të PV në BSh
Pesha e PV në PBB
Totali i të ardhurave të PV në PBB
Totali i të ardhurave të pakushtëzuara të PV në PBB
Burimi Informacionit: Ministria e Financave: Drejtoria e Marrëdhënieve Ndërqeveritare
LOCAL GOVERNANCE PROGRAM IN ALBANIA
2009 (plan)
Local Budgets/Revenues
•
Own sources
– Tax on small business
– Tax on property (building)
– Other local fees and tariffs
•
•
Expansion of financial means
Fitful progress of taxes
LOCAL GOVERNANCE PROGRAM IN ALBANIA
Local Budgets/Revenues
Central Government Transfers
•
Unconditional grant from 75 % to 50%
•
Competitive grant/ tripled (in 2000 was 2.2 bln today 5.5 bln Leks)
•
Conditional transfer
from 85% of LGU to almost
zero today
50.0
2009 (plan)
50.0
2008
2007
Vitet
2006
2005
2004
2003
2002
2001
2000
-
20.0
Pesha në Buxhetin e PV
LOCAL GOVERNANCE PROGRAM IN ALBANIA
40.0
60.0
80.0
100.0
Pesha e grantit të PQ në buxhetin vendor
Pesha e të ardhurave të veta në buxhetin vendor
LGU Structure in General / Conclusions
• Financial improvement/ instruments increasing annually, yet at
modest level to the total of state budget (11%) or GDP (3%)
– New taxes on management
– Funds allocated by Central Government
– Loan and borrowing instruments
• TAV and government transfers at the same contribution today
• Taxes contribute most, but fitful progress
–
–
Small business and tax on property
Local fees
• Competitive Grants, a deficient scheme
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–
–
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General evaluation criteria
Equal criteria for all LGUs (poor, mountainous, in distress)
Delays in fund allocation
High political representation in project evaluation commission
LOCAL GOVERNANCE PROGRAM IN ALBANIA
LGPA Partner Cities’ Budgets
• Consolidated budget of 10 partner cities, similar structure
with LGU budge in Albania
•
Small (7-11 thousand inhabitants)
– Gramsh
– Himarë
– Librazhd
•
Medium (21 – 38 thousand inhabitants)
– Pogradec
– Lezhë
– Fushë Krujë
– Kukës
•
Large (65 – 93 thousand inhabitants)
– Shkodër
– Fier
– Korçë
LOCAL GOVERNANCE PROGRAM IN ALBANIA
Findings
LOCAL GOVERNANCE PROGRAM IN ALBANIA
Taxes
• Constitute from 45% to 85% of own revenues
• Tax on small business is the most important one
• Tax on property is the second most important tax
• Tax on impact on infrastructure provides a
considerable contribution to LGU budget
• Fiscal package with a long list of other local/temporary
taxes
LOCAL GOVERNANCE PROGRAM IN ALBANIA
Tax on Small Business
•
The most important source of LGUs
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Legislation changed in years
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Difficulties of its administration by local tax offices
– Business do not keep accounting books
– Businesses do not use the cash registries
– Local tax administration does not render a clear division of duties
related to the verification of the small businesses with the central
administration
– Central tax administration is focused on the large businesses
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Unstable performance in tax collection
– Increase of number of active businesses, decrease of revenues
– Decline of economy
– Improvement of fiscal administration
LOCAL GOVERNANCE PROGRAM IN ALBANIA
Tax on Small Business / Recommendations
•
Simplification of legislation
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Transparency in calculating tax obligation by local administration
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Better collaboration and continuous exchange of information with
central government
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Better information to businesses on their obligations and method of
calculation, and terms of payment
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On-site inspection on issue of detailed documentation of transactions
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Installation of cash registries (central government project)
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Computerization of registration and administration system of tax
information
LOCAL GOVERNANCE PROGRAM IN ALBANIA
Tax on Properties
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Component of tax on property is important
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A very poor performance of tax on arable land
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Tax on building, a great potential of revenues
•
Problems:
– Lack of information of building area size
– Poor communication with Real Estate Registration Office
– Failure of registration of informal buildings
– No mandatory measures on collection of tax
– Tax collection to families is connected with administrative services to them
•
Recommendations
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–
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The law does not foresee a tax on urban land; application of this tax would increase
local revenues
Development of a special law would further prioritize this fiscal instrument
Establishment of tax on individual income would render administration and collection of
tax on property more manageable
LOCAL GOVERNANCE PROGRAM IN ALBANIA
Local Fees
•
Second to taxes, they are the most important resource of LGUs
•
Most important fees are:
– Cleaning;
– Greenery
– Street lighting
– Educational, cultural and administrative services
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There is a long list of tariffs
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Most often, they are duplicated with other temporary taxes
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Recent changes in the law on local taxes will reduce the own revenues
of LGUs by 20-55% as anticipated in the 2009 plans of LGUs.
LOCAL GOVERNANCE PROGRAM IN ALBANIA
Asset and Other Revenues
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Important but unused resources of LGUs
– In Gramsh, revenues from assets constitute 20% of local own revenues
– In Lezhë 12%
– In Fier 1.5%
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Depends on local assets of LGUs and the process of their registration
– In 2001, the law on transfer of assets from Central Government to LGUs
approved
– LGPA assisted 5 LGUs to complete the asset transfer process
– Gramsh has registered its transferred assets; Lezhë, Korçë and Pogradec to
complete it soon; process in Fushë Krujë underway
•
Detailed evaluation of assets status
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Preparation of an analysis for their management
– privatization;
– Lease, rent, use;
– sale;
– Establishment of public-private partnerships, etc.
LOCAL GOVERNANCE PROGRAM IN ALBANIA
Loan from Financial Market
•
A powerful financial instrument to carry
out important funding projects
– Debt might be at maximum 1.3
times more than the revenues of
this unit during the last fiscal year
– increase its investment funds
about 3.2 times compared to the
normal funding provided in its
annual budget
– For large municipalities, the effect
of this instrument is up to 5-6 times
higher of annual investment
budget
– Fushë Kruja managed the
agreement of the first commercial
loan received by a local
government unit;
amount of loan is $1 million
LOCAL GOVERNANCE PROGRAM IN ALBANIA
Base year 2008
Debt limits based on stock
criterion
in Mln. Leks
in Mln. Euro
in Mln. USD
Himarë
73.42
0.56
0.82
Librazhd
78.11
0.60
0.87
Lezhë
107.66
0.82
1.20
Gramsh
109.37
0.83
1.22
Fushë Krujë
161.35
1.23
1.79
Kukës
176.49
1.35
1.96
Pogradec
265.24
2.02
2.95
Korçë
518.76
3.96
5.76
Fier
585.09
4.47
6.50
Shkodër
681.95
5.21
7.58
Legislation on Local Tax System and
Decentralization Reform
•
Law on Organization and Functioning of LGUs of year 2000 stipulated
local finances
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In 1992, local taxes were included in the Law on Tax System in the
Republic of Albania
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Number of local tax increased annually
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In 1998, a complete (and currently applicable) list of taxes was
established
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In 2002, a special law on local tax system
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The document analyzes more than 20 important fiscal amendments
since 1992
LOCAL GOVERNANCE PROGRAM IN ALBANIA
Findings from Fiscal Decentralization Reform
• Since 1992, fiscal decentralization has brought in:
– Transfer of authority to LGUs
– New financial resources
– Discretion to impose new taxes and tariffs and their rate
– Harmonization of fiscal procedures on collection and
administration of taxes, apart of recent legal changes (Law No.
10117, dated 24.04.2009)
• there is a nonsense in the application of the revenues tax
• The Law on the Organization and Functioning of the Local
Government provides for the LGUs own revenues and the shared
taxes and tariffs.
• If the shared taxes and tariffs were to be applied, there would be
eliminated the replication of two taxes (tariffs) on small business and
there would be wasted less energy by both fiscal administration
LOCAL GOVERNANCE PROGRAM IN ALBANIA
Recent Legal Changes in Local Tax System
Issue
Small Business Tax
(Article 11)
Existing law
The LGUs may change
the tax level by +/-30%
Approved amendment
The LGUs may change the tax level by
+10/-30%
Immovable property
tax (Article 21)
The LGUs may change
the tax level by +/-30%
The LGUs may change the tax level by
+10/-30%
Other taxes
(Article 32)
The LGUs may change
the tax on the
occupation of public
spaces by +/-30%
Temporary taxes
(Article 33)
When necessary, the
LGUs might approve
temporary taxes
The change must not exceed the level
of +10% of the indicative level of the
small business tax, calculated on the
total amount of the tax on the
occupation of public spaces and
other applicable taxes and tariffs.
The sum of temporary taxes together
with the applicable taxes and tariffs8,
should not exceed the level of +10% of
indicative level of small business tax.
The sum of applicable tariffs should in
no case exceed the level of 10% of the
indicative level of small business tax
The local tariffs and
their administration
(Article 35)
LOCAL GOVERNANCE PROGRAM IN ALBANIA
Consequencies of Recent Legal Changes
•
Considerable decline of local budget, estimated at 20 – 55%
•
De-evaluation of successful decentralization reform, by eliminating the fiscal
autonomy
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Considerably reduces available funds for investments
•
Harms the capital investment plans and LGUs’ capability to implement strategic plans
•
Eliminates relationship between fees and public service cost, unable to cover its cost
•
Affects local borrowing capability
•
Creates difficulties in clearly defining the individual local tax in the process of tax
management
•
Reduces municipal and communal budgets, thus affecting simultaneously the region’s
budgets
LOCAL GOVERNANCE PROGRAM IN ALBANIA
WAYS TO MANAGE RECENT LEGISLATION
AMENDMENTS TO THE LOCAL TAX SYSTEM
•
Amendments to the law on Local Tax System and more specifically the limitations imposed
on other taxes and temporary taxes as well, is a vilation of the law on the Organization and
Operation of the Local Government, particularly in Articles:
– 15.3
– 16.2
– 16.3 (a)
– 16.4
•
Recommendation
– The revision of these legislative amendments considering the above-mentioned quoted
articles is strongly recommended and the central government should financially
compensate the difference in the budget of the respective unit budget through the
unconditioned grant
For the time being, in a situation when the local administration has to back these legislative
amendments, it is recommended for the LGUs :
1. To summon local councils by reviewing the fiscal packages in compliance with these
legislative amendments (2009) in order to cut proportionally the expense budget, or
2. For the short time left for this finance, the fiscal package should not be altered. The
legislative amendments should be estimated one more time and should be taken into
consideration in the fiscal package and budget of 2010. In the meantime the tax payers
should be considered as creditors according to the estimations of the next fiscal year
•
PROGRAMI I QEVERISJES VENDORE NË SHQIPËRI