The Tuesday, VETËVENDOSJE! featured governing Alternative regarding fiscal policies as well as their distribution in the Kosovo Consolidated Budget. This presentation, the content of which will be examined in General Council VETËVENDOSJE! Presented today Shpend Ahmeti and Visar Ymeri.
Given the current situation, the level of economic development and the level of technical preparation of the tax administration, the role of fiscal policy for years was reduced to two basic elements, that of generating enough revenue budget and the allocation of budgetary resources towards providing public services. As a result three other targets important fiscal policy: support economic growth, economic stability and the reduction of social inequality skipped. Kosovo modest budget, funded largely by the customs revenues which are about 830 million Euro, and very few other local revenues (income and property taxes). Customs revenues reflect three types of tax, Value Added Tax (VAT), customs and excise duties on certain goods. These taxes are taxes on consumption, where all tax is transferred to the final consumer. Most of the consumption in Kosovo is subsistence consumption, therefore, we can conclude that the budget is financed by taxes on the poor and middle class.
Current income tax is progressive scale up to ten percent, scaled to 0, 4, 8 and 10 percent. Considering that the majority of employment in Kosovo is the average salary of 300 Euros, we conclude that the majority of tax paying middle class low population. Since there is no other health insurance payments and other insurance, Kosovo has the lowest cost of wages in the region. At the same time the poor and middle class fund most of the Kosovo budget. But the poor and middle class do not benefit the majority of Kosovo budget.
High unemployment (about 45%, of which, 17% in extreme poverty), and low average wages, holding the economy hostage to underdevelopment, ended in a vicious circle with the government’s fiscal policies. Tax administration is unprofessional, and the source of the corruption and violations. Legislation is often of the translated and copied, adapted to the real situation. There are development policies that would put fiscal policy in view of employment and economic growth.
Principles and Alternative goals VETËVENDOSJE! S
SELF-DETERMINATION! fiscal bases its policies on the principles of justice and equality in taxation and distribution, and believes that fiscal policy should work towards achieving the stimulation of production, investment and job creation. Fiscal policy also need to make balancing the burden of financing the budget, based on things that would benefit from public money. Today, the poor and middle class pay most of the budget but even the minority of the budget. With VETËVENDOSJE! This burden will be transferred gradually to those who can bear the burden and benefit more from society.
Important part of our goals is to achieve ease the tax burden on the poorest strata, removing taxes on the consumption of basic food products. And that means zero VAT on bread, oil, flour, salt, milk, sugar, books.
This was accompanied by measures which affect the growth of the budget, solidarity and the creation of a sustainable economy therefore to build a strong and balanced budget that provides funding priorities for strengthening the rule.
Personal income tax
SELF-DETERMINATION! believes that tax should be progressive, increasing revenues from income taxes, approaching the levels of the most developed countries of Europe and the U.S.. This progressive level of taxation will be implemented over the years to provide the necessary transition revenue collection. This is to ensure that the poor and middle class will pay less taxes under governing VETËVENDOSJE!’s While rich layer will contribute more to the development of the country, according to the benefits enjoyed by society . These tax levels will be linked to the minimum wage, since the latter be unified. Progression of taxes will be 0% for minimum wage, to 5% for three times the minimum wage, 10% for five times the minimum wage, 20% for ten times, and 30% minimum wage njëzetfishtin. While corporate taxes will have margins equal to the income tax.
Personal income tax
Tax rate proposed by VETËVENDOSJE!
0-170 wages euro, income tax should be 0%;
To pay 170-500 euros, income tax should be 5%;
500-850 euro wages, income tax shall be 10%;
850-1700 Euro wages, income tax should be 20%;
And over 1700 euro wages, income tax should be 30%
Current tax scheme
For 80-250 euros wages, paid 4% personal income tax;
To pay 250-450 euros, paid 8% tax on personal income;
And to pay over 450 euros, paid 10% personal income tax;
Value Added Tax
Given that the European Union allows and recommends several levels of Value Added Tax, and taking into account the difficult economic and social situation in country VETËVENDOSJE! will implement the escalation of Value Added Tax in Kosovo at three levels. VAT shall be excluded for life in Kosovo based food products, namely bread, oil, salt, sugar, milk, flour and books. While the products are considered as the most luxurious and unnecessary will rise up at the rate of 20 percent, in line with European Union countries. Eg restaurants will be VAT rate of twenty percent. This policy will bear the burden of VAT from poor layer to the layers that are better in society. As VAT is a tax on consumption, and a rewards or punishes a particular activity, will be used as government policy VETËVENDOSJE!’s To stimulate or destimuluar certain activities. VETËVENDOSJE! will remove VAT on education, because education should not be taxed, and will facilitate all educational activities in the interest of the Value Added Tax.
Tax on profit
Kosovo has a 10 per cent profit tax, which is on par with most countries in the region. This level has been reduced in most countries to promote foreign direct investment. In Kosovo, since the tax reduction has decreased foreign investment as well as local, so I can not say that this reduction has stimulated investment. Also, there is no evidence that the reduction of profit tax passed reinvestment of funds in new job openings. Income tax would be re-evaluated. This tax policy be used by VETËVENDOSJE! to stimulate the creation of new jobs. With scale, our government will provide tax relief for investments aimed at productive activities and job opening. Any company that shows riiinvestimin profit for creation of new jobs, especially in manufacturing, shall be exempt from profit tax.
Withdrawal of earnings in personal income and consumption will be taxed in accordance with the above principles. Property tax will be re-evaluated to balance the tax burden among the population by things that benefit society as well as taking into account the need for Kosovo to work farmland uncultivated lands therefore be taxed higher. This is so motivating to work the land.
The Republic of Kosovo is limited to fiscal policy because the official currency of the Republic of Kosovo is the Euro even though the Euro offers currency stability, at the same time prevents monetary government policies. Also because of the power that it creates difficulties currency in Kosovo’s exports, which are relatively more expensive. Given the recent discussions on the future of the euro as well as long-term perspective and remote Kosovo’s integration into the European Union, Kosovo should start planning and negotiations with the Republic of Albania for the adoption of the common currency of both countries. This would facilitate and promote trade and cooperation between the two countries to national unity. This plan would mean the procedure on the joint construction of national monetary policies.