BRATISLAVA, September 21, (WEBNOVINY) — The state will most probably change the key on the basis of which regional and municipal self-governments are financed. According to the Finance Ministry draft the Cabinet adopted on Wednesday, the state budget should transfer to municipalities a share of revenue from a mix of taxes, including the personal income tax, excise taxes and VAT. Currently, they are financed only by a share of revenue from personal income tax. As a result of this change in 2012, municipalities would receive less than they would according to the current formula.
The new formula was set so that municipalities would receive 3 percent more than they have in 2011 which would mean they receive 1.637 billion euros. Yet according to the current mechanism, municipalities would receive 18.6 percent (240 million euros) more than in 2011. The Finance Ministry argues that this would not be fair at a time when the central government has to reduce its spending. “Consolidation of public finance is impossible without participation of towns, villages and counties. Municipal self-governments with its expenses exceeding 4 billion euros are an important component of public finances,” states the draft.
Ultimately, the state should, according to the draft, transfer some 13 percent from share of tax revenue to municipalities. Towns and villages should receive 9.72 percent of collected tax revenue, counties 3.25 percent. “I consider this a good and fair solution as we’re convinced that municipalities also have to participate on consolidation of public finances. This mix of taxes is more fair and sustainable,” said Miklos on Wednesday. Labor Minister Jozef Mihal (SaS) praised the proposed system due to alleged higher stability of municipalities’ income.
The Association of Towns and Villages (ZMOS) opposes the introduction of the new system with a mix of taxes, claiming that in smaller towns and villages, basic services to their citizens could be under threat. ZMOS proposed keeping the current system and increasing the amount of funds for municipalities by four percent from the state budget. Miklos refuses any essential changes to the system but said a guaranteed 3-percent y/y increase of the amount transferred to the municipalities could be considered.
SITA