Property tax – municipalities’ challenge

The current level of property tax collection in Kosovo municipalities shows a solid level of civic responsibility.
Based on the research conducted by FOL, we find out that in 22 municipalities during 2012 was collected 45 percent of tax charged. This is a clear indication that the Kosovars have not yet established a sense of the state, which functions exactly on the basis of property tax or other taxes that create the budget.
Such a situation produces a chain of problems. From such a collection of the tax, under 50 percent, by all means that the municipalities will be deprived in some of their projects, which will be pended due to lack of budget, which is consisted by property tax.
On the other hand, those who refuse to pay property taxes do not benefit anything from this process, but only increase their individual debt. This is because that to the amount of property tax debt is added punitive interest and penalty from the excess of the legal term to pay the debt.
The level of payment of property tax under 50 percent, billed for the respective year means that the total debts on property taxes every year rise to over 50% of the billed amount.
Thus, from 11,835,059 euros billed by 22 municipalities, on property tax for the current year, only 5,330,840 euros have been collected.
From a total of 288.709 property tax billed (in municipalities analyzed for this report), it can be seen that the proportion of the properties that have paid, at least partialy (above zero euros) is only 115.777 properties, or less than 32% of the properties which are billed. This shows that as a result of non-adequate management of property tax from municipalities of Kosovo, about 68% of registered properties pay nothing.
In this context, it is obvious that there is a substantial difference between the level of payment of property tax by residential properties and commercial properties. For the first category, the level of payment is about 40 percent, while for the second category, the payment reaches 38 percent during the year 2012, in 22 municipalities analyzed.
In residential properties are included all residential properties, apartments, houses, those free of tax, unclassified property, under construction, excluded, abandoned, and garages. While in commercial properties are included all properties that are classified for commercial use, including industrial properties and processing industry, agricultural properties, those for recreation, services, transportation, social properties, cultural and institutional.
The data of 22 municipalities shows that nominal rate of tax collection from residential properties is larger (74.13%) than commercial (63.29%).
Such a result of property tax collection, brings municipalities in a very delicate position, which in order to cope with this problem, they must necessarily review the way of collection of this debt with the purpose to change the means of the collection. The problem becomes even more serious due to the fact that municipalities currently collect the tax for only 40 percent of the registered and billed properties, leaving out the 60 percent, which impact gratly the municipal budget.
Considering the figures of collection of property tax in different categories, Kosovo municipalities urgently need to find strategies to increase the collection rate of property tax. The analysis of FOL for 22 municipalities has produced a number of recommendations which municipalities could take them as a guide in their effort to increase their performance in this area.
The primary task of the municipalities is the correct registration of new properties and those existing but unregistered, as an essential factor in increasing the collection rate. This should be taken seriously by rigorous exercise of the measures for collection and also forced collection, as provided by the Administrative Instruction, which provides for the confiscation of assets and real estates.
Municipalities should also consider the possibility of taking conditional measures on taxpayers, but always in accordance with current laws, in a way that such a measure not to interfere with human rights. Finally, municipalities also need to train the Unit for property tax and also use public campaigns to inform citizens about the importance of property taxes payment and also about the eventual sanctions that they may deal in the case of refusal of this legal obligation.
This article is a overview of the “Analytical Report on the importance and success of the collection of property tax in the municipalities of Kosovo” published by FOL