The increase in the income of the municipalities in the north, foreseen by the amendments to the Law on Financing of Local Self-Governments, is evaluated in Kolašin as "positive, but insufficient", and in Mojkovac as "fair distribution".
The amendments to that law provide that municipalities in the coastal and central regions will reduce their share of income from personal income tax, so that instead of 50%, they will receive 40% of the tax collected from employees residing in their territory. To the northern municipalities, that share is reduced from 100 percent to 89 percent, but they will be allocated 10 percent of that tax, collected in the central and coastal regions.
Given that the number of workers in these two regions is much higher than in the north, the municipalities in the north, according to the Ministry's estimate, will receive 10 million more in revenue. As stated, this money will be distributed as grants to the northern municipalities in accordance with the level of development, on which the ministry will pass a special by-law.
The municipalities of Tivat, Nikšić and Plužine are expressly against the proposed amendments to the Law on Local Self-Government Financing. The leaders of those municipalities believe that this will result in a reduction of the already planned budgets and that this will punish the successful municipalities that mostly financed from their budgets what the state needed.
According to the Secretary for Finance, Property and Economic Development Vuk Vuković, there is an investment boom in Kolašin, and the construction of new buildings in the previous period was not accompanied by the construction of public infrastructure. In the coming period, he claims, the obligations of the Kolasin local administration in the field of improving public infrastructure, imposed by rapid construction, are large.
"Also, according to the Law on Planning and Construction, high-category hotels are exempted from paying fees for communal equipment of construction land, so their construction created an obligation to provide public infrastructure from the Municipality, and the Municipality was deprived of the income from this fee. For these reasons, I expected that the distribution of funds, obtained from economic citizenship, would be fairer and that Kolašin would receive a larger amount of funds", explains Vuković.
All northern municipalities received one million euros from economic citizenship. Kolašin's secretary for finance claims that in this way, "the different needs of local communities and the fact that a large number of these projects are implemented in the territory of the Kolašin municipality are not taken into account."
As part of the economic citizenship program, seven tourism projects with over a thousand rooms in 4- and 5-star hotels were included in the territory of the municipality of Kolašin. We are talking about several hundred applications, where each applicant had the obligation to pay the amount of 100.000 euros to the fund for infrastructure projects in less developed municipalities in the north of Montenegro, reminds Vuković.
"Therefore, I believe that the legal amendment is positive, but insufficient to adequately respond to the challenges brought by the investment boom in our city. I expect that the Government will provide additional support to the Municipality in the coming period, in order to ensure the sustainability of local finances and create preconditions for further development of the local community", concludes Vuković.
From the Cabinet of the President of the Municipality of Mojkovac Vesko Delić they say that the changes to the Law are positive, because they will increase the municipality's own revenues, but that we should also take into account those revenues that local self-governments lost in the previous period, also due to changes in legal regulations. They remind that earlier there was a decrease in income from income tax due to the realization of Europe and now also the introduction of a non-taxable part of earnings.
With this, they remind, the state took the income of local self-governments on several grounds: income tax, income from the Equalization Fund (partly accumulated from income tax) and surtax on income tax of natural persons. Delic's cabinet says that the state tried to compensate for the decrease in the income of local self-governments by changing the law and increasing the percentage of income tax concessions.
"Back, until 2021, municipalities from the south and central part had a percentage of income transfer based on income tax of 12, while the law that has been in force since then increased this percentage to 50, and municipalities in the north to 100 percent. It is indisputable that the increase to 50 percent of the concession of that tax for the southern municipalities and the municipalities of the central part brought significant revenues, while the municipalities in the north, despite the high percentage, had more modest revenues, bearing in mind the fact that income tax is paid on the basis of residence of the taxpayer and the amount of taxable income," said Delić's cabinet.
Migration also affects lower tax collection
They explain that "migration of the population leads to the continuous loss of that type of income in the northern municipalities". The fact that, with the amendments to the Law on Local Self-Government, revenues will be reduced by around 10 million euros in the southern municipalities, and increased in the northern municipalities, Delic's cabinet considers it a "fair approach".
They claim that "in this way, the state shows that it is looking at the effects of the tax policies it established in the previous period and, through intervention, leads to a fairer redistribution of income and more even regional development."
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