Property tax and communal fees have always been one of the most important local municipal revenue sources. With the beginning of decentralization in July 2005, tax administration became a central responsibility performed completely by local governments.

Building upon the modern tax administration systems established by the predecessor USAID/Decentralization Project (USAID/DP), the USAID/Macedonia Local Government Activity (USAID/MLGA) continued with a comprehensive set of activities supporting further development of modern and fully functional tax administration departments in all Macedonia local governments. These efforts include establishing of modern tax administration departments and providing them with necessary tools for successful administration of property tax, gift and inheritance tax, tax on real estate transfer and communal fees. The challenge MLGA faced was how to bring tax administration capacities of the rural municipalities at the same level with tax administration capacities of the urban municipalities, at the same time do significant improvement in tax collection rate and update of property tax registries. Assistance that USAID MLGA provides is mainly directed at assisting rural municipalities. At the same time, MLGA continued good cooperation with and support to all other Macedonia tax administration departments in their efforts for continued improvement of the Macedonia tax administration system.

The goal of the Project is assisting municipal tax administration departments in developing their managerial and administrative capacities to successfully implement tax administration responsibility. Specifically, the MLGA mandate is to provide technical assistance and training to improve the capacity of municipalities to collect own source revenues, particularly but not exclusively, with respect to property tax; provide technical assistance to update and expand property tax registries and improve efficiency rates in tax collection; and provide training in property assessment and valuation and assist municipalities to establish systems for property inspection.

To reach this goal, USAID/MLGA designed a comprehensive set of tax administration activities. The results of these efforts include but are not limited to: assisting eighteen (18) municipalities to establish modern, fully functional stand-alone tax administration departments. By this, USAID provided assistance of 100% coverage to all Macedonia municipalities. 

The tax administration support to municipalities consisted of providing complete IT equipment (hardware and software), on-the-job training on the use of Local Tax Administration System (LTAS) as well as assistance on designing and organizing public outreach campaign, support on property tax data base update for three pilot municipalities (where the existing property tax register is being updated and increased for 15% while their property yield is increased for more than 200%); and other direct technical assistance aimed at improving the overall municipal tax administration function.

In addition to this work at the local level, MLGA continued activities at the national policy level in the area of improving overall tax administration legislation framework and bringing it closer to the real estate market values that is implemented in more advanced western democracies. The policy activities include support that MLGA provided to the Ministry of Finance through proposals developed in cooperation with ZELS and other interested parties regarding tax administration legislation framework, especially regarding the update of the Real Estate Valuation Methodology.

Tax administration in Macedonia is live process and needs continuous support. Having in mind what municipalities inherited regarding tax administration in 2005 when decentralization started including old and outdated property registers, not enough trained staff, lack of appropriate software for tax administration management, very low tax collection rate, after three years (March 2006 – transfer of data base from Public Revenue Office (PRO) to municipal tax administration departments) or from the moment when municipalities completely undertook the tax administration process, we can proudly say that Macedonia tax administration process is on good track.