History

What is fiscal system?

What are taxes?

Types of taxes

History

In the beginning of the 90’s, along with the introduction of the new economic system in the Republic of Macedonia, it has been introduced a new fiscal system based on the principles of market economy, private property, independence of the economic subjects…New principle which was incorporated in the current fiscal system of the Republic of Macedonia was the principle of allocate neutrality of taxes and the budget according to which, with the instruments of the fiscal policy some sectors would not be stimulated and supported.

New important principle was the repeal of the higher number of contributions and their replacement with taxes. Only the contributions for social funds were kept i.e. the contributions for health, pension and disabled insurance. It was promoted also the principle of transferring the tax burden from direct to indirect taxes, which meant reduction of the income taxes and increasing the consumption taxes. In this function it was also the introduction of the Value Added Tax (VAT), from 1st of April 2000, replacing the previous Turnover Tax.

What is fiscal system?

Fiscal system of one country means the system of public expenditures which are applied in that country.

Public revenues are the revenues which are collected by the state from the citizens and the economy and they serve to cover the public needs i.e. for the needs of the state and citizens.

By public expenditures is understood the usage of the resources collected from public revenues for covering the state public needs, for its functioning. In order to be able to perform its functions, the state should dispose with financial recourses.

In many countries there is a state property and the state collects own revenues from its own property. Those revenues are not often sufficient to cover the expenditures made by the state in performing its functions, and are of interest to citizens and the states as a whole. For that reason in all countries, the state besides the revenues from its own property collects also other revenues. These revenues the state is collecting from the citizens and the companies.

One of the basic principles and traditional rights of the state is to introduce obligation for the citizens and the companies to contribute for covering the public expenditures, taking part from its own revenues and from its own property. The most accepted principle is that every citizen should participate in the public revenues, according to the financial power. This principle is contained in the Constitution of the Republic of Macedonia, Article 33:

Everyone is obliged to pay tax and other public fees and to participate in the settlement of the public expenditures in a way prescribed by law.

In the Republic of Macedonia the public revenues are divided into:

• Revenues from the state and public enterprises and institutions
• Taxes
• Contributions
• Customs
• Tariffs
• Public loans
• Gifts and aid

What are taxes?

Taxes are public revenues which are arising from the obligation imposed by the state to the citizens and the companies, obligatorily to separate part from their own income or property for the state’s needs fulfillment. The basic function is fiscal, but very often the taxes are used for achieving some economic and social goals.

Basic elements of every tax system are:

• Subject, object of taxation
• Taxpayer
• Tax base
• Tax rate

1. Subject of taxation

Subject of taxation are: revenues, consumption and the property. Determination of the subject or the object of taxation i.e. which taxes will be paid at the same time means determination of the types of taxes.

In the past the agriculture was the most important activity and the land the most important property, the subject of taxation mainly was the land and the revenues from it and later the taxation was on the other property such as buildings, capital and revenues. During the time the role of the consumption i.e. the turnover significantly was increased. The state introduced and collected taxes on some products on which it had monopoly, such as the salt and the tobacco. The state collected customs, excise, paying toll and some other similar imposts which were type of consumption tax.

2. Taxpayer

Important issue for each type of tax is – who is the taxpayer, who should pay the tax? Tax obligation holders are the companies and the citizens. Also it should be taken into consideration that there is a difference between the companies according to their size.

3. Tax base

The tax base is that size and amount from the subject of taxation on which the tax is calculated. For example, the Profit Tax is paid on the realized profit during the year and the Personal Income Tax is paid on all income which the citizen has on all bases during one year.

4. Tax rate

The tax rate is the percentage, the part that should be paid in the form of tax from the determined tax rate. If the tax rate is determined on 10%, it means that such percentage from the total profit which is taxed should be paid as a tax to the state.

Two types of tax rates are mostly applied:
- Proportional and
- Progressive

Paying tax with proportional rate means that the tax should be paid always with the same rate, no matter of the amount of the property or the income. At the progressive rate, on a higher amount of property, income or profit, it is foreseen higher rate and on the smaller profit it is foreseen lower rate.

Types of taxes

1. Income taxes
- Profit tax
- Personal Income Tax

2. Consumption taxes
- Value Added Tax
- Excises
- Customs

3. Property taxes

Along with the process of decentralization in the Republic of Macedonia, from 30.06.2005, the administration of the property tax and the municipal fees is performed by the municipalities, as units of the local self-government and the City of Skopje, as a separate unit of the local self-government.

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