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Sources of own municipal revenues are as follows:

 

  • Real estate tax;
  • Tax on business practice license;
  • Permit fees for professional services;
  • Tax on motor vehicles;
  • Municipal administrative fees;
  • Permit fees on construction and demolition of buildings and other structures;
  • Fees on issuing official certificates and documents;
  • Regulatory tariffs for development or maintenance of infrastructure;
  • Traffic fines;
  • Fines for violating municipal regulations;
  • Income from leasing;
  • Co-payments for education and health.

12 March 2018

Sources of income

Regardless of the form of collection, all municipal own source revenues shall be deposited in the own source revenue sub-account of the respective municipality in the Kosovo Budget, within the Treasury account. Most of the above categories of revenues are direct revenues, i.e., they are administered and collected by the municipal administration itself. On the other hand, some of them (such as traffic fines) are indirect revenues, i.e., they are collected by the relevant ministries or agencies at central level and then transferred to the municipal account.

Imposing of taxes, fees, fines and their rate is regulated on an annual basis by each municipality with the regulation on taxes, fees and charges that must be approved by the municipal assembly. But in the case of some of the taxes, fees and fines, their rate or manner of use must be in accordance with the criteria and procedures established by the laws of the relevant fields.

Funding from own source revenues has several advantages, the municipality uses them in the way it considers best to meet the needs of the community because they are not dedicated revenues; unlike government grants, funds from these revenues are transferred to the next year's budget for the respective municipality, meaning they cannot go back to the central budget regardless of whether or not there is a surplus, as is the case for example with the government grant, which municipalities usually rush to spend before the end of the fiscal year.

The share of own source revenues in the budgets of the municipalities of Kosovo is around 10-20%, and within these revenues property tax is the main contributor.

To have a good governance process in place, as a member of the municipal assembly you have to:

Review very carefully all relevant documents proposed by the municipal executive such as: Municipal own source revenue planning, Municipal regulation on taxes, tariffs and charges, Municipal regulation on property tax.

When considering these documents, you should consider the economic effects and their rationality, e.g., the reason why a certain tax rate is set, why tax rates have been set and why the criteria for property valuation are set in a certain way.

In particular, keep in touch with citizens and inform them which projects could be funded from own source revenues through payments made by citizens themselves. The citizens should be informed that the revenues that are paid for taxes and charges to the municipality are still spent in their municipality.

Supervise the work of the municipal inspectors by assessing involvement of taxpayers, registration of new properties, level of billing, level of revenue realization, measures undertaken to collect liabilities, etc.

Operating grants

Amount of the grant for primary health care is based on municipal population figures and on the standards provided by the Ministry of Health. Normalization of the population takes into account the age and gender structure of the population as well as the number of elderly, and of those with special health needs. The specific primary health grant for 2018 was approved by the Grants Commission in the amount of 48.5 million euros.

Amount of the grant for pre-university education is based on the number of registered pupils/students and on the standards provided by the Ministry of Education, Science and Technology. The formula for this grant also takes into account the national curriculum, special needs education, operative expenses (excluding wages), and classroom size standard. For pupils/students of ethnic minorities and for schools of mountain areas, there is an average higher funding per pupil/student, given the small number of classrooms. The specific grant for pre-university education for 2018 was approved by the Grants Commission in the amount of 170.2 million euros.

General grant

For purposes of financing other municipal competencies, the Law on Local Government Finances provides for a general grant based on the formula set out in Article 24 of the Law on Local Government Finance. This grant is 10% of the total budgeted central government revenues (i.e. without own source revenues of municipalities), excluding: revenues from the sale of assets, other extraordinary incomes, dedicated revenues, and receipts from borrowing, defined donor grants.

Allocation of this grant among municipalities aims at ensuring municipal revenue stability; promote equality among municipalities, and access to public services for each municipality and for minority communities in the respective municipalities. Therefore, allocation of this grant amongst the municipalities is based on several criteria:

Of this amount, the revenues are deducted as specified in Article 24 of the Law on Local Government Finances and we come to the general grant allocation base for municipalities, whose grant for 2018 is in the amount of € 173.6 million. The 2.7% share of the general grant is allocated to 14 municipalities with a population of fewer than 22,000. Of this amount, half is allocated to these 14 municipalities based on the number of their residents and the other half is allocated as the same fixed amount for each of these municipalities.

For purposes of levelling up the low capacity of own source revenues of smaller municipalities, each municipality initially receives annually a fixed general amount of 140,000 euros, deducting by 1 euro per capita or 0 euro per municipalities with a population of equal to or greater than 140,000 inhabitants. Then the remaining amount is divided among the individual municipalities based on the formula for allocating the general grant to municipalities according to LPLF: the population figures are calculated by eighty-nine percent (89%); the geographic size of the municipality by six percent (6%); the minority population in the municipality is calculated by three percent (3%); municipalities where majority of the population is comprised of national minorities with two percent (2%).

Unlike health and education grants, which should be specifically dedicated to these services, the way of spending the general grant is at the discretion of the municipality itself.

Other sources of funding

Transfers for delegated competencies are transfers from relevant ministries to municipalities to exercise delegated functions from the central level.

Grants for enhanced competencies are grants given to the municipalities by the Law on Local Self-Government are granted additional own competencies:

  • For the municipalities of Mitrovica North, Gracanica and Sterpce: enhanced competencies for providing secondary health care, including registration and licensing of health care institutions, employment, payment of salaries and training of staff and administrators.
  • For the Municipality of Mitrovica North: competences for university education, including registration and licensing of school institutions, employment, payment of salaries and training of instructors and educational administrators.
  • For all municipalities with majority Serb community: the competencies to exercise responsibilities for cultural issues and enhanced rights for participation in the selection of local police station commanders.

These grants are specific as compared to the general grant and, similarly to grants for health care and education are dedicated to enhanced competencies and cannot be spent on other activities.

Extraordinary grants are allocated to municipalities in exceptional cases in case of a serious case affecting the municipality (such as natural disasters) to help the municipality handle these cases financially.

Borrowing as a form of financing of municipal investments is allowed, but the municipality is not allowed to be financed by the international debt, the amount of debt should be covered by the collateral owned by the municipality and may not exceed 50% of the municipality's own source revenues during the last year, etc. The request for borrowing by the municipality should be approved by the Municipal Assembly, and authorized by the Minister of Finance.

Financial assistance from the Republic of Serbia is permitted under the Law on Local Government Finances and the Law on Public Financial Management and Accountability. The latter defines the municipality's financial assistance from the Republic of Serbia as dedicated revenue of that municipality and obliges the municipalities to use them only for purposes directly relating to the exercise of their municipal competencies. Financial assistance from the Republic of Serbia does not affect the amount of municipal grants given by the government.

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