The structure of tax revenues in Kosovo continues to be dominated by consumption taxes, reflecting the current nature of the economy and the level of formalization of businesses. The Director of the Tax Administration of Kosovo, Mentor Hyseni, estimates that the analysis of revenues should be seen more through the type of taxes than the division by sectors, while emphasizing that the processes of fiscalization and risk analysis have directly influenced the increase in revenues and the reduction of informality.

According to Hysen, identifying the sectors that contribute the most to tax revenues is not always straightforward, as TAK's main focus is on types of taxes.

Hyseni explains on the economic show "Shtylla" that the majority of budget revenues come from the Value Added Tax, which accounts for approximately half of total revenues, while personal income taxes and corporate profits make up the rest.

Watch the next episode of "Shtylla" here: https://www.youtube.com/watch?v=orxa7xi0G8Y

This structure, according to him, clearly shows that Kosovo has an economy oriented more towards consumption than production, as VAT is directly related to expenses and not to investments or profits. At the same time, this proves that the fiscalization of businesses engaged in sales and production is at a relatively good level.

"Now with the sectors it is a little problematic these days, we know the most problematic sectors, while with taxes we measure it more by the type of taxes. For example, VAT accounts for somewhere around 45.5%, 49.5% of total revenues. Somewhere around 29 are personal income taxes and 21 are corporate income taxes. It is more important to show what this percentage of revenues shows according to the tax division, than to see which, which sector produces the most. In this aspect, it shows that Kosovo is more of a consumer society, which explains why the value added tax is a consumption tax. It is not a tax on investments or profits that is being made. So on the one hand it shows that Kosovar society is very consumerist, so our production is low. On the other hand, it shows that there is a pretty good fiscalization of the part of businesses that deal with sales or production in Kosovo", emphasizes Hyseni.

Speaking about the northern municipalities, Hyseni estimates that the situation there is more complex not only for the ATK, but also for other public institutions. However, he emphasizes that a concrete fiscalization process has been launched through an identification sticker project, which aims to identify registered businesses and those operating without registration.

This process has now been extended to all municipalities in the country and is expected to be completed within about six months, supported by the engagement of interns in the field.

The part of the four municipalities is a little more complex, not only for the Tax Administration, but also for all the services that are offered there. However, we have started a fiscalization process there through the sticker process. It is a sticker project where an A3 format sticker is placed on each business that is registered. This aims to see which other businesses are operating and which are unregistered. That is, we started the main activity in the northern municipalities, then we included all the municipalities of Kosovo so that the goal is to register all those businesses and fiscalize them. The process is going well, we have also started recruiting around 60 interns who will be distributed across the regions, solely for this purpose of implementing this project that we are thinking will take us around six months. And I believe that it will be the first step that will help in the real fight against the informal economy", stressed Hyseni.

Regarding tax audits, Hyseni explains that the vast majority of businesses are selected for audit based on risk analysis, which takes into account dozens of indicators to assess the risk level of each business. To avoid any suspicion of a selective approach, even cases proposed by regional structures are now subject to the same analysis, being audited only if they result in high risk.

"Now, to be honest, when I came here in August of this year, there was a procedure at ATK that 90% of businesses that are inspected are inspected based on risk analysis, which is a department that does risk analysis, as a platform it analyzes around 72 factors to assess which business, in which risk category it is. Normally when you have few staff, it is natural to focus on businesses that have a higher risk. The other 10% of businesses were given the freedom to select regional directors based on the suspicions they have in the field, based on the inspectors they bring. Now it was the first decision, I think it is the fifth decision of the first ones that I have taken, that even this 10% part should not be subjective. This then reduces this selective approach to inspecting businesses, since, to be honest, that 90% is still done with risk analysis. Yes "We wanted to remove this 10% as well so that businesses would not have the slightest doubt that TAK is selectively controlling them," he emphasized.

The government in office, weeks ago, decided to increase the minimum wage, which will initially be 425 euros from January and in July to 500 euros. Economists had said that this decision to increase the minimum wage will affect informality, since businesses and chambers of commerce say that they were not consulted on such a decision.

However, Hyseni also believes that the increase in the minimum wage has no direct connection to the increase in informality. He emphasizes that revenues from the wage tax are significantly lower compared to VAT, therefore the increase in wages is expected to have a positive effect on the increase in tax revenues.

According to Hysen, the connection between the increase in the minimum wage and informality is not sustainable.

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"The connection between the increase in the minimum wage and informality is not stable. Well, we have about 457 thousand average workers who are registered on a monthly basis with the Tax Administration, and I said before that 49.5% are revenues from VAT, only 29% from personal income. This shows that income from wages is taxed quite a bit. It seems to me that with the increase in the minimum wage or with the increase in wages in general, that the increase in the minimum wage raises them in all wage categories, for the Tax Administration and for the state there will be an increase in tax revenues. That is, I do not, I do not see any connection with informality, the issue of increasing the minimum wage.

Regarding the diaspora, he explains that Kosovo has signed dozens of international agreements to avoid double taxation, allowing investors not to be taxed twice for the same profit. However, there are no specific fiscal policies that favor the diaspora, beyond administrative facilitations for registering and opening businesses through the “one-stop-shop” model.

However, the most fragile point of ATK, as described by the director himself, remains the accumulated debt of 600 million euros. To address this problem, Hyseni announced a plan to restructure the debt collection process. The plan foresees the decentralization of this responsibility, empowering regional directorates to pursue debtors./KosovaPress

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