Law on local government finance –2012 amendments

Reform results and the structure of para-fiscal and non-tax charges in

the budget of the Republic of Serbia and the local governments

• Amendments to the Law on LG Finance adopted in September 2012 – one of the main manners of the conducted reform of para-fiscal charges in the previous phase

• The most significant changes – determining maximum amounts or total elimination of local signage fee (depending on concrete taxpayer and the legal entity size and scope of revenues) and limiting the maximum amount of utility fee for keeping motor vehicles

• The effects in the City of Belgrade are estimated at ca. RSD 3 billion a year

• The effects in all local government in total are estimated at ca. RSD 5 billion a year

Law on local government finance –2012 amendments

• In the analysis of all non-tax charges in 2011, this fee was marked as the most fund-generating individual form in the system (its fiscal importance was nearly RSD 15 billion at that point)

• Starting from 1st January 2014, the fee has been entirely abolished and it is not charged anymore

• On this ground, the local governments in Serbia will lose RSD 16 billion, which was the collected sum in 2013

• The City of Belgrade will lose more than RSD 8 billion on this ground, which is more than 12% of total city budget revenues

• However, given its arbitrariness and discriminatory treatment for different taxpayers, and due to the cease of Constitution justification, its elimination is a significant step.

Land use fee – deserved retirement

• The Ministry of Finance formed a Working group for drafting the new law

• The foundations for LG finance need to be set up in a clear and transparent manner, as much as possible, and their funding sources and basic determining elements need to be precisely defined – the aim is to have as little high-amount forms as possible

• Property tax needs to become the most significant individual revenue source – application of the new Property Tax Law starting from 2014 also needs to allow taxation of construction, agriculture and forest land, in addition to facilities

New Law on LG Finance – drafting and adoption planned for 2014

• The LG budgets took the greatest burden of the reform of non-tax charges in 2012

• The reform of some fees in 2012 did not bring the expected results – financial burden was concentrated on a lower number of taxpayers than before

• A joint assessment is that the following reform phase needs to focus on the national authorities, institutions and agencies and be subjected to change and reform

• LGs have further engaged in expanding the number of taxpayers and the scope of some fees (primarily the property tax) in order to compensate the lost revenues

• Land use fee – possibilities of revenue compensation?

The conclusions from a round table with local government representatives

20 most fund-generating non-tax fees in 2013 and their distribution

No.Account number Title Distributed revenues National budget Provincial budget Total LGs

1 2 3 4 5 6 71 741534 Land use fee 15,976,768 5 0 15,976,7632 714581 Special fee for use of state road (road fee) 15,316,043 15,316,043 0 3 742271 Republic court fees 10,155,432 10,155,432 0 4 742253 Land development fee 7,862,848 0 0 7,862,8485 742221 Republic administrative fees 6,061,200 6,061,200 0 6 742323 Fee for use of Republic Geodetic Authority data 4,134,284 4,134,284 0

7 716111 Utility fee for company name display (signage fee) 3,716,937 249 0 3,716,6898 741511 Fee for use of mineral resources... 3,426,170 1,814,661 241,041 1,370,4689 741562 Fee for use of water resources 2,917,235 2,128,281 788,954

10 714549 Fee for emission of SO2, NO2, particulate matter... 2,916,574 1,749,945 0 1,166,62911 714513 Utility fee for keeping motor and road vehicles 2,683,664 310 0 2,683,35412 714562 Special environment protection and improvement fee 2,676,057 4 0 2,676,053

13 717512 Special fee for registration of motor vehicles 2,472,124 2,472,124 0 14 741591 Fee for products turning into special waste flows 2,242,074 2,242,074 0 15 745126 Fees for funding the salaries of disabled persons... 2,217,190 2,217,190 0 16 742284 Fee for organizing classic games of chance 1,684,563 1,684,563 0 17 741563 Fee for releasing water 1,272,855 1,172,830 100,025 18 742287 Fee for organizing special games of chance - betting 1,142,900 1,142,900 0 19 742286 Fee for organizing special games of chance – slot machines 1,018,982 1,018,982 0

20 741566 Drainage fee for legal entities 999,799 204,360 795,440 21 Total 90,893,699 53,515,437 1,925,460 35,452,80422 % 100.00 58.88 2.12 39.00

20 most fund-generating non-tax fees from 2011 to 2013 and the rank changes

Amount in 000 RSD Rank

NoAccount number Title 2011 2012 2013 2011 2012 2013

1 2 3 4 5 6 7 8 91 741534 Land use fee 14,519,073 14,580,323 15,976,768 1 2 12 714581 Special fee for use of state road (road fee) 14,309,771 14,595,084 15,316,043 2 1 23 742271 Republic court fees 10,609,932 10,984,906 10,155,432 3 3 34 742253 Land development fee 10,289,509 9,705,422 7,862,848 4 5 45 742221 Republic administrative fees 9,220,068 8,172,532 6,061,200 5 4 56 716111 Utility fee for company name display (signage fee) 4,913,131 4,154,946 3,716,937 6 6 77 742323 Fee for use of Republic Geodetic Authority data 3,427,509 3,642,806 4,134,284 7 7 68 714513 Utility fee for keeping motor and road vehicles 3,042,588 3,082,648 2,683,664 8 9 119 741511 Fee for use of mineral resources 2,857,608 3,434,500 3,426,170 9 8 8

10 714549 Fee for emission of SO2, NO2, particulate matter... 2,231,338 1,828,262 2,916,574 10 15 1011 741591 Fee for products turning into special waste flows 2,137,443 1,865,493 2,242,074 11 13 1312 714562 Special environment protection and improvement fee 2,114,190 2,058,955 2,676,057 12 11 1213 714541 Fee for use of water resources 2,064,651 159,057 927 13 >20 >2014 745126 Funds for financing the salaries of disabled persons 1,980,504 2,422,010 2,217,190 14 10 1415 742284 Fee for organizing classic games of chance 1,728,870 1,828,596 1,684,563 15 14 1516 714536 Special cigarette fee from Article 70 of the Law on Tobacco 1,648,027 1,255,092 0 16 17 >2017 714514 Annual fee for road motor vehicles,... 1,487,551 1,519,864 683 17 16 >2018 714547 Pollution fee 1,430,418 1,136,404 3,514 18 19 >2019 714542 Water protection fee 1,173,157 9,998 3,801 19 >20 >2020 742124 Fee for laboratory analysis of food samples... 957,215 672,621 72,648 20 >20 >20

Total 92,142,553 87,109,519 81,151,377 Source: Ministry of Finance, Treasury

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