“MY VAT” – ONLY RICH FAMILIES WILL RETURN ONE AVERAGE SALARY
- Only a family that spends 20,000 Euros a year for goods and services or less than 2% of Macedonian families will be able to return an average salary in their family budget – as advertised by the prime minister
- Most citizens and families will be able to count on an annual return of around 700 denars for the poorest, up to several thousand denars among the middle class consumers
- 1800 denars is the maximum amount that a person can refund as part of VAT for three months, while the maximum amount of one fiscal receipt is 30,000 denars.
Authors: INBOX7 team
Only the richest households that spend 1.2 million denars annually will be able to return an average salary with the new measure “My VAT” measure starting July 1 this year, shows the analysis of Finance Think, a think tank center from Skopje. The poorest households will return only 738 denars annually, the analysis says.
The 15% VAT refund measure, which we all pay for purchasing daily various products and services, and which we see calculated in the fiscal receipts, is being introduced by the state with the intention of reducing the gray economy, but also to return money to the citizens.
“Thanks to this measure, a family of four will be able to return up to 28,800 MKD per year in the family budget. Something more than an average salary in our country, that is a salary plus for every family”, said Prime Minister Zoran Zaev during the official presentation of the measure.
However, according to the aforementioned mathematics, it turns out that this “salary plus” will only be able to “earn” families that spend nearly 20 thousand Euros a year, that is, a 1,500 Euros monthly consumer basket. This is a very small percentage of families, given the fact that only 2% of the employees in the country have a salary over 40,000 denars per month, and over 60,000 denars even less, while the majority of the employees are in the segment up to 16,000 denars net salary, or 46% of the citizens, according to the State Statistical Office. A total of 33% of the citizens get salaries in the segment from 16,000 to 30,000 denars.
Or, as Finance Think analysis suggests, poorer households will be able to count on a refund of some of the VAT in the amount of not more than 2,000 denars per year, while the middle class will be able to refund from the state a percentage of VAT in an amount that varies from about 2,500 to almost 9,000 denars, depending on the category of consumer basket in which they belong. Only over 5% of the families in North Macedonia can hope for over 10,000 denars, and up to the maximum amount of almost 29,000 denars as much as one family can refund a share of VAT in one year. The Ministry of Finance and the Public Revenue Office say that this type of measure is being introduced for the first time, not only in the country, but in the region, and that if their expectations are fulfilled and citizens ask for fiscal receipts, about 50 million Euros will be returned annually.
“The maximum amount of refund for one person will be 1,800 denars for three months. 98% of households will be able to make a refund of VAT on their total consumption, while for those richest 2% there will be a limit. This benefit is provided for all citizens, and for fairness, so that the refund does not go mainly to the richest citizens, limits are set that prevent the return of a part of the VAT for a fiscal receipt of over 30,000 denars”, informed now already former Finance Minister Dragan Tevdovski during the promotion of the measure.
A MEASURE TO SUPPRESS THE SHADOW ECONOMY
The expert public basically accepts the measure as being correct in its intention to reduce the shadow economy.
“There is a certain potential to suppress a part of the shadow economy, but in this period of two years, the Government could have been a bit more convincing in explaining how much of the gray economy it is actually trying to reduce with this measure”, says university professor Marjan Petreski.
According to some estimates, he adds, the shadow economy is from 20 to 30% of the formal economy, which means between 2.5 and 3.5 billion Euros a year.
“Suppose that they would tax it at a rate of 10%, that is at least 300 million Euros lost revenue for the state. If the measure My VAT returns 50 million Euros in revenue to the budget, then there is reason to implement it, because it will also spend 50 million Euros, such as the first year projection. But the government has not offered a basic calculation of what the potential of the measure is. On the contrary, if 10 million Euros from the shadow economy are suppressed, and 50 million Euros spent, then it means that it is not good”, explains Professor Petreski from the University American College.
Or, to put it differently, if citizens use the refund of a part of the VAT mostly with traders that regularly issue fiscal receipts anyway, and the issuance of fiscal receipts is very weakly stimulated by those traders who have so far mistaken this obligation – then the measure loses its sense, that is, the key goal is not fulfilled, and that is the fight against the shadow economy.
Sanja Lukarevska, Director of the Public Revenue Office
“By paying taxes, citizens invest in the progress of the state. Now for the first time some of the VAT returns back to them, which is why citizens do not deserve and should not tolerate non-issuance of fiscal receipts. We expect them to massively start asking for fiscal receipts from traders”.
Pavle Gacov, Tax Adviser
“For one quarter, the maximum amount of VAT that you can return is 1,800 denars, but this is ideally, in practice, the amounts will be much smaller. But still, when have we got back anything from the state? Yes, to give a chance to the possibility that a part of the shadow economy will be ‘whitened’, and we, as citizens, can get a penny in our pocket”.
Marjan Petreski, University Professor
“If the My VAT measure returns 50 million Euros in revenue to the budget, then there is reason to implement it, because it will also spend 50 million Euros, such as the first year projection. But the government has not offered a preliminary calculation of what the potential of the measure is, that is, how much of the shadow economy is planned to be suppressed”.
A FEW EXAMPLES IN PRACTICE
Tax advisor Pavle Gacov from the Pro Agens consulting bureau made several simulations as to how the 15% VAT return for the citizens would look like.
“For example, if in a quarter one collects fiscal receipts with a total turnover of 70,000 denars for purchased goods and services, VAT is 18%, the amount of VAT in this case is 10,678 denars, while what will be returned to you by the state is 1.602 denars. Example 2: You have fiscal receipts with a total turnover of 20,000 denars for three months, with VAT of 5%. The total VAT in this case is 952 denars, and you will be returned 15% of this, or 143 denars. Or, if we have a citizen who spends more, that is, he has spent let’s say 120,000 denars through his fiscal receipts for a quarter. With a rate of 18%, the VAT in this case is 18.305 denars, and 15% of that or 2.746 denars should be returned to him. But, as the measure prescribes a maximum of 1,800 denars return per person for three months, the citizen will be returned this limit”, Gacov explains.
He adds that the calculation of the highest turnover with which VAT can be returned in the amount of the maximum allowed 1,800 denars for one quarter, is 66,667 denars at a VAT rate of 18%, as well as 240,000 denars turnover at a VAT rate of 5%.
From this mathematics we conclude that from one fiscal receipt with VAT of 18%, what the citizen receives as a return is 2.28% of the total amount of the account, while in the case of 5% VAT, that percentage is 0.7%.
“There is a danger here, which I hope the PRO has anticipated, and that is if you ask a trader who does not usually give you such a fiscal receipt to give one to you, he will tell you, so how much is your return? 2,28%? I will give you a 5% discount, but do not ask for a fiscal receipt”, says Gacov.
On this note in one of the debate TV shows on this topic, the PRO Director, Lukarevska, answered that discount is precisely the amount that the state should return to the citizens.
“Now they have the decision, whether they will want to take money back and help fight the tax evasion and reduce the shadow economy, or allow the neighborhood shop to continue to not to pay taxes”.
WHAT DOES THE MEASURE “MY VAT” MEAN?
The measure “My VAT” will be implemented through the PRO system, that is, an application that the citizens can download and scan the fiscal receipts with their mobile phones. Through 5 simple steps the application will be the tool through which citizens will now be able to get a share of VAT for the first time, thus becoming partners in the fight against the shadow economy, as noted by the Director of PRO, Sanja Lukarevska.
“From now on the fiscal receipts will no longer be a piece of paper that will remind the citizens only of the money they spent, but also of the money that will be returned to them. My tax, my savings is the motto of this measure. By paying taxes, citizens invest in the progress of the state. Now for the first time some of the VAT returns back to them, which is why citizens do not deserve and should not tolerate the non-issuance of fiscal receipts or issuing void fiscal receipts”, said Lukarevska.
The right to return a part of VAT will be realized by registering the data from the bar code of the fiscal receipt through the PRO application software, no later than 10 days from the date of issuing the fiscal receipt.
“The VAT return shall be made on the citizen’s transaction account, without submission of a request, ex officio by the PRO, within 60 days after the end of the calendar quarter in which the fiscal receipt was issued. The refunded amount of VAT on this basis does not represent income that is subject to taxation on personal income tax”, explains tax adviser Pavle Gacov.