Fiscal decentralisation starts in Macedonia

167.jpgTwo years after Macedonian authorities started transferring responsibility to the local level, the second phase of the country’s decentralisation plan is under way. Earlier this month, five municipalities, out of a total 85, asked to take over financial responsibility in several areas.

The municipalities — Veles, Ohrid, Gevgelija, Sopiste and Aracinovo — say they are prepared to handle the salaries of employees in schools, kindergartens, nursing homes and local cultural institutions, beginning in September.

The administration in Skopje says it is committed to pushing the process forward. “All municipalities that have applied and fulfil the conditions move to the second phase of decentralisation,” Prime Minister Nikola Gruevski said after a meeting with local self-government representatives.

“It is in our interest, maybe more than in the municipalities’ interest, that this process is completed as soon as possible,” he added.

Out of the 85 municipalities however, only 30 are ready to assume financial management in their in educational, cultural and social sectors, according to government estimates.

Municipal authorities say that for fiscal decentralisation to be implemented successfully, the government should increase the proportion of VAT and personal tax that goes to municipalities. They are also calling for land management to be placed under municipal authority.

“We will wait for the effects of the new property tax and communal duties, and if there are no improvements of the conditions in municipalities, we will request a higher percentage of the VAT,” Association of Local Self-Government Units President Andrej Petrov said.

Labour unions in the areas of education, science and culture see the issue differently.

“The problem is not in block subsidies provided by the Ministry of Finance, but in the insufficient equipping of municipalities,” one union president, Dojcin Cvetanovski, said.

In early August, a government commission will release a final report on the readiness of municipalities. Those that are given the “green light” and apply to enter the second decentralisation phase will be able to assume the responsibilities in September.

Although the chosen municipalities will take over responsibility for paying out salaries of teachers, nurses and cultural workers, the actual funds will continue to come from the state budget.

The money will be deposited in the municipal accounts for each area, and the municipalities will distribute it internally. In September, the municipalities will be reviewed by the central government. If shortcomings are found, their competencies can be withdrawn.

The Finance Ministry estimates that a half of the municipalities will assume competencies in September, and additional work will be done with those that are not ready. Local Self-Government Minister Abduraman Mehmeti has promised assistance to those municipalities that lag behind in the process.

In 2005, when decentralisation began, it was expected that almost 90% of municipalities would be ready to assume financial responsibility.

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