Minoski: EUR 22 million secured from the Government for the companies through the profit tax

27.8.2016, Skopje, Kurir News Agency – Creating favourable business climate, economic growth, foreign and domestic investments, unemployment reduction, profit tax exemption for the companies reinvesting the profit, … More than EUR 22 million was made available to the companies on the basis of this tax measure alone last year. We discussed all these issues with the Minister of Finance, Kiril Minoski.

This Government is oriented towards creating favourable business climate, attracting foreign investments and reducing the unemployment. What is the key to the success in such unfavourable political environment?

- In the period so far, the Government has been intensively working on several priorities. As already mentioned, the first priority is job creation, being related to boosting investments, which, on the other hand, contributes to improving the living standard of the population. Creating private sector growth requires quality business surrounding. In the past several years, the Government proved, also being verified in a series of World Bank reports, to be committed to creating business surrounding to provide for faster growth of the private sector. To that end, we are undertaking, almost each year, a series of measures aimed at improving the business surrounding, the main objective of which is creation of better conditions to boost investments, both foreign and domestic. As for foreign investments, we are intensively working on attracting them, while with respect to domestic investments, we are implementing a series of measures in the tax sphere. By applying the low tax policy, most of the funds will be available for the companies since, as a Government, we believe that the market is one of the most efficient mechanisms and the private sector knows the best way to allocate these funds. Regarding our priority to create prosperity, we are committed to boosting the development of the private sector through series of measures, providing for changing the structure of the work positions. First of all, main goal of our strategy is creating jobs that generate more employment, while the next priority is changing the structure of work positions and creating new jobs to be paid better, requiring more sophisticated skills of the labour force.

Companies reinvesting the profit are exempt from paying the profit tax and, for that very reason, they generate large savings. Savings in the amount of EUR 22 million are generated last year alone. Analyses have shown that, each year, companies decide more and more to reinvest their profit thanks to this measure. Number of taxpayers that reinvested their profit in 2015, compared to 2014, increased by 73.56%, amount of reinvested profit in 2015, in relation to 2014, surged by 83.34%, while the amount of profit generated by the taxpayer that reinvested their profit picked up by 60.80%. Such savings enable the companies to reinvest their profit in new investments, to employ, thus contributing to higher economic growth. As for this measure, Minister Minoski said:

- We, as a Government, are committed to low tax policy and policy according to which the private sector manages most of the funds. Main objective of tax exemptions as regards reinvested profit is actually for most of the funds reinvested in new technologies and equipment to be returned to the companies themselves, since value added is thus created in the private sector by producing products and services. According to our data, almost EUR 22 million are made available to the companies by applying this measure. The companies paid EUR 22 million less taxes. Thus, conditions have been created for these funds to be invested in improving the business processes for introduction of new technologies, improving the skills of their employees, all this, ultimately, providing for creating value added at company level. And again, it also means additional revenues for the state through the taxes they pay quantitatively in the state budget.

Key to success is attracting foreign direct investments. How much do they contribute to the economic growth?

- Foreign investments have a positive impact on the development of the Macedonian economy from several aspects. So-called greenfield investments mean building new factories and creating a new structure in the Macedonian economy. Automotive industry is a typical example thereof.  For instance, if one analyzes the export structure 10 and so years ago and today, it could be seen that share of highly sophisticated products, mainly in the automotive industry, is significantly larger compared to 10 and so years ago, when so-called traditional industries dominated the export structure. This speaks of the foreign investments contributing to changing the structure of our export, hence the share of higher value added products and services increases. Effects the investments have are also extensive in the job creation. Not only jobs are created, but the employees also have an opportunity to acquire new skills and to get familiar with the new technologies implemented in the highly developed countries. In addition to these investments aimed at building factories, so-called Greenfield investments, we, as a Government, also encourage the brown field investments, i.e. investments in already existing facilities, when the foreign partners provide new technology. What is also important is the transfer of “know-how”, above all in the production of products and services that have not been present in our country before. These are the positive effects foreign investments have on the Macedonian economy. Therefore, we, as a Government, are committed to attracting foreign investments in the country.

At the moment, Macedonia has the lowest unemployment rate. You, as a Government, strive for reducing the unemployment to 22%. How are things going in this field?

- Main priority of the policies of this Government is job creation and unemployment reduction. Should historical data, publicly available, be analyzed, it could be seen that a lot has been achieved in this field. A lot of jobs have been created at the companies of foreign investors, in addition to stimulating active employment measures on the labour market. Activities the Government undertakes are well known, especially through the campaigns “Macedonia Employs” and Macedonia Employs 2”. Main goal of these active measures is to boost employment of certain target groups. Above all, the categories of unemployed persons facing long-term unemployment, as well as stimulating employment at young people. To that end, we, as a Government, are undertaking intensive measures, which are being implemented through the Ministry of Finance, Ministry of Labour and Social Policy and the Employment Agency of the Republic of Macedonia, all to the end of encouraging the process of employment and the unemployed persons to acquire certain skills necessary to perform the working tasks.