TAX ADMINISTRATION OF KOSOVO “TAX REFORM and MODERNIZATION”

1. TAX ADMINISTRATION OF KOSOVO “TAX REFORM and MODERNIZATION” Ekrem Hysenaj, deputy director Washington D.C, IMF, June 8 - 9, 2009

2. CONTENT • TAK from Beginning to Today • Tax Reform • TAK Modernization and Strategic Planning

3. TAK HISTORY • Established in January, 2000 • In 2003, competences were transferred from UNMIK-u to MEF (TAK) • Tax Legislation in compatible with the best international practices • One database center • Continual increase of incomes.

4. TAX SYSTEM IN KOSOVO • Tax on Hotels, Beverage and Food, January 2000 • Presumptive Tax, July 2000 • VAT Tax, July 2001 (modified in 2002, 2004, 2005 and 2008 ) • Wage Tax, April 2002 • Profit Tax, April 2002 till December 2004 • Personal Income Tax, January 2005 • Corporate Income Tax, January 2005

5. TAK EMPLOYMENT From 30 employees in 2000, to 654 in 2006 (131 in Headquarter and 523 in Operation) • Qualification Structure: • Superior 69.60 % 455 • High 3.10 % 20 • Medium 25.80 % 169 • Others 1.50 % 10 • Gender Structure: • Male 67.60 % 442 • Female 32.40 % 211 • Ethnic Structure: • Albanian 95.10 % 622 • Serbian 4.20 % 27 • Others 0.70 % 4

6. TAK STRUCTURE

7. INCOMES THROUGH THE YEAR (mil. €)

8. TAX REFORMS - 2009 • Law Nr.2004/48, amended, on Tax Administration and Procedures – February 11, 2009 • Law on Personal Income Tax – January 1, 2009 • Law on Corporate Income Tax – January 1, 2009 • Law on VAT – January 1, 2009

9. TAX REFORMS - 2009 • Amended Law • Law Nr.2004/48, amended, on Tax Administration and Procedures – February 11, 2009 • Tax Rate • Law on Personal Income Tax -January 1, 2009 • Law on Corporate Income Tax -January 1, 2009 • Law on VAT-January 1, 2009

10. Reforms which are included within the Law on Tax Administration and Procedures • Benefits to business: • Significant revisions to the penalty regime; • Revisions in the application of payments to reduce accruals; • Cessation of accruals during the term of an installment agreement if the agreement is kept. • Additional tools to the tax administration to address: • Tax collection issues; • Proves for goods without origin; • Issue taxpayer identification numbers; • Fiscal cashier implementation; • Requirements for bank transfer in certain business to business transactions; • Authorization to establish a criminal investigation function; • Increased powers of internal investigation to deal with allegations of corruption; • Improved enforced collection provisions; etc.

11. PERSONAL INCOME TAX

12. CORPORATE INCOME TAX and VAT

13. TAK MODERNIZATIONStrategic Plan 2007-2010 • The primary objective of the 2007 – 2010 strategic plan was : • to guide the tax administration in its modernization efforts • to address recommendations from a 2006 technical assistance visit of the IMF • to assist the tax administration is meeting the European Union Tax Administration Blueprint criteria.

14. Updated Strategic Plan 2008-2010 • In April 2008, the IMF conducted another technical assistance visit • Based on recommendations from that visit the strategic plan was updated to revise some goals and change some of the timelines.

15. COMPONENTS • The Strategic Plan has four components: • Customers • Staff • Systems • Organization.

16. TAK Strategic Plan

17. TAK Strategic Plan (Cont)

18. Our goal of modernization and increased capacity within the Strategic Plan are focused on: • Taxpayer Education • Fiscal Numbers • Enforced Collection • VAT Refund and Audit Processes • Non-Filers and Under-Reporters • Audit risk assessment model • SIGTAS and Network • Declaration and Payment Processing • Electronic Filing

19. Remaining Major Deficiencies • TAK Staffing has remained stagnant at 654 positions for 4 years • Additional Technical Training is needed • Pay Scales are very Limited • Enforced Collection Staff is poorly trained and not well-qualified • While improving, staff guidance is still lacking in many areas.

20. Technical Assistance • TAK has received strong on-site support from both the EU and USAID • IMF Technical Assistance Visits have proven to be very beneficial in framing the goals of the TAK Strategic Plan.

21. PRISHTINA VIEW

22. TAK HEADQUARTER

23. THANK YOU …