Less than ten million for underdeveloped municipalities

The distribution of the money taken from other municipalities has begun. The Association of Municipalities said that this will only partially help them to function normally and that a "systematic and permanent way" should be found. The Minister of Finance warned that the tax debts of municipalities are increasing, as well as the number of employees working in them

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Photo: Municipality of Bijelo Polje
Photo: Municipality of Bijelo Polje
Disclaimer: The translations are mostly done through AI translator and might not be 100% accurate.

The Ministry of Finance issued a rulebook containing the percentages according to which the municipalities in the north, Zeta and Tuzi will be given an additional amount of ten million euros this year, so that Bijelo Polje will receive the most money, 1,19 million euros, and the least 456 each. municipalities of Žabljak and Plužine.

However, from the Union of Municipalities, they told "Vijesta" that this will only partially help underdeveloped municipalities to function normally, and that a systematic and permanent way to support them should be found.

Zeta and Tuzi became the north

This money was provided by the fact that the municipalities of the coastal and central regions have a reduced percentage of income from personal income tax. According to data from the Ministry of Finance, from the beginning of the year until March 27, 2,85 million euros were collected on this basis in a special account.

In the first version of these amendments to the Law on Local Self-Government Financing, there were only municipalities in the north, but with a subsequent amendment, the "side of the world" Tuzi and Zeta became "northern municipalities".

Underdeveloped municipalities, among which there are mostly municipalities from the north, already have additional privileges by receiving higher percentages of diverted income from some taxes, they also have income from the Equalization Fund, so this is the third form of receiving additional money.

Percentages based on development and population

The Ministry of Finance states that they obtained these percentages based on the degree of development of the municipality, established by the law regulating regional development, corrected for the number of inhabitants in the municipality, based on census data.

"The provisions of Article 11a of the Law on Financing of Local Self-Government stipulate that 10% of income from income tax of natural persons residing and generating income in the territory of municipalities belonging to the Primorsky and Central Regions shall be allocated to a special account of the Ministry of Finance. Allocated funds, based on the above, are transferred from the special account of the Ministry of Finance - Grants to Municipalities, opened at the Central Bank of Montenegro, to the Main Account of the State Treasury, according to the inflow for the specified period, and from the Main Account of the State Treasury are paid to the municipalities of the Northern Region and the municipalities of Tuza and Zeta", stated the Ministry of Finance.

The money, in accordance with the collection of this tax and the distribution percentage, will be paid to these municipalities by the fifth day of the month for the previous month.

The Ministry of Finance explained that the Association of Municipalities was consulted during these changes to the Law on Financing of Local Self-Governments.

"Bearing in mind that the Law on Amendments to the Law on Financing of Local Self-Government, on which the Union of Municipalities gave its opinion, defined the basic elements related to funds in the name of grants to municipalities, which also include the criteria for the distribution of those funds, and that are the Rulebook on the manner of distribution of funds to municipalities in the name of grants, these criteria were elaborated and based on them the participation of municipalities that have the right to use funds in the name of grants was determined, it was not necessary to include the Union of Municipalities in the procedure of distribution of these funds", stated the Ministry.

Ten million will only partially help

The Association of Municipalities states that the assessment of the Ministry of Finance, when adopting these legal solutions, was that about 10 million euros will be allocated in this way to the municipalities of the northern region.

"However, this will only partially help the more or less normal functioning of these municipalities. However, ensuring the financial sustainability and development of the north, especially the municipalities that are in the tax debt reprogram, requires a systemic approach and the active participation of all participants in this process and decision makers in order to ensure a more even regional development. Otherwise, as a result, we will have an even greater outflow of the population of that region, and that is certainly not in anyone's interest", stated the Union of Municipalities.

According to the formula from the Rulebook, the percentages that municipalities will receive from this sum are determined: Andrijevica 4,9 percent, Berane 9,28 percent, Bijelo Polje 11,91 percent, Gusinje 5,25 percent, Kolašin 5,43 percent, Mojkovac 5,43 percent, Petnjica 6,13 percent, Plav 6,13 percent, Plužine 4,56 percent, Pljevlja 8,93 percent, Rožaje 8,76 percent, Šavnik 4,9 percent, Žabljak 4,56 percent, Tuzi 6,65 percent and Zeta 7,18 percent.

Milatović was against it

President of the state Jakov Milatovic at the end of last year, after the first adoption of this law, he refused to sign it, and returned it to the parliament for reconsideration.

The aforementioned legal solution, as he said then, contains shortcomings and its application in practice would have negative effects on the development of local self-governments in the coastal and central regions, especially bearing in mind that the budgets of those local self-governments were adopted in accordance with the current Law.

"Amendments to the law in this way, without clear criteria when it comes to the level of development, would lead to a paradoxical situation where certain underdeveloped municipalities from the Primorsky and Central regions, which receive money from the Equalization Fund, remain without part of the ceded revenues, which are directed to underdeveloped municipalities from the Northern region", the announcement states.

Milatović then stated that "the reduction of the development gap cannot be achieved by slowing down the growth of developed municipalities, but also of undeveloped ones, in the central and coastal regions, which undoubtedly results in a reduction of ceded revenues".

Municipalities owe 81 million for taxes, 107 million for loans

Minister of Finance Novica Vuković announced last week that all Montenegrin municipalities and companies whose founders had a tax debt of 31 million euros as of December 81,31 last year, of which 44,96 million related to reprogrammed debt and 36,35 million to current debt . He also stated that the municipality's debt based on loans is 107 million euros.

He then proposed the Government to make a conclusion, based on which the Tax Administration with municipalities and public institutions and companies would conclude a Protocol on the dynamics of current debt settlement, as well as on the basis of transfer loans.

Vuković emphasized that the analyzed period was from December 31, 2022 to the same day in 2023, and that according to the data, municipalities with enterprises have about 16 thousand employees. He added that 1,06 thousand workers were newly employed in the monitored period. The minister stated that they have excellent cooperation with the municipalities, that the state is there to support them, but that the dynamics of debt settlement, that is, the spending of common money at the state level, must be created.

Community of municipalities: Money should be found in the budget and not by taking from other municipalities

The Association of Municipalities states that during the consultations on changes to the Law, they indicated that they support the intention of the Ministry of Finance and the Government to take measures that will contribute to the even regional development and sustainability of local public finances, especially in the north of the country.

"We have also pointed out that the deprivation of income from the municipalities of the central and coastal regions, which would compensate for the losses of the municipalities of the northern region, is not in the spirit of the European Charter on Local Self-Government, the Constitution of Montenegro, the Law on Local Self-Government, and not even the Law on Budget and Fiscal Responsibility itself. Namely, Article 7 of this Law prescribes the imperative obligation of the proposer of a law or other regulation to, in the phase of its preparation, propose other sources of financing in case of reduced receipts or increased expenditures. That is why, as an association of all municipalities in Montenegro, and bearing in mind the Government's determination for the development of the municipalities of the northern region, and the need to provide stable public finances (including local ones) that will enable greater economic growth and progress of society as a whole, without it being at the expense of a part of the local self-government units, it was proposed that, in the name of grants to the municipalities of the Northern regions, and in accordance with their level of development, determined a certain percentage of allocation from the current state budget for that purpose. However, this kind of our suggestion was not adopted," stated the Union of Municipalities.

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