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Municipal taxes are changing for 2025, here's how the categorization is expected

Politiko 2025-01-07 09:14:10

Municipal taxes are changing for 2025, here's how the categorization is

During 2025, the formula for municipal taxes is expected to change, as well as the categorization of local taxes for the occupation of public space and facades for the use of advertisements/signs.

The amendments to the Law "On Local Government Finances" are projected for the third quarter of this year, after the conclusion of the general elections. The government plans to change the formula for the unconditional financial transfer of local government during 2025. These amendments that are expected to be implemented aim to regulate the municipal financing scheme; adapting the principle of equalization related to the number of population according to the 2023 Census.

It also aims to provide financial stability for low-income municipalities, as well as to change the table that divides municipalities by category. These changes are expected to bring more revenue to municipalities and a more accurate distribution of funds in proportion to their population.

Local government revenues for the period January-November 2024 reached 36.6 billion lek, an increase of 8 billion lek compared to the previous year or 27.9% and an excess of 2 billion lek compared to the planning made according to official data from the Ministry of Finance. The item of local taxes has the largest share, where revenues in the 11-month period reached 29.5 billion lek, an increase of 6.4 billion lek compared to the previous year and at a record level in the entire decade. But again, some municipalities have arrears and are in financial difficulties, thus not providing the necessary services to citizens.

Municipalities received from the state budget in 2024 in the form of unconditional transfers approximately 360 million dollars, with an increase of 49 million dollars compared to this year. In total, for 2024, the unconditional transfer was 36.583 billion lek. The formula for distributing the unconditional transfer is defined in the law “On Local Self-Government Finances”, according to which it identifies the needs for municipal expenditures based on the relative population, population density (which reflects the differences in the cost of exercising functions between municipalities) and the actual number of children in kindergartens and students in 9-year and secondary schools in each municipality.

In addition to the equalization of service costs through the density component, the unconditional transfer allocation formula also brings about the equalization of fiscal capacity, which is based on actual revenues from personal income tax, from the annual tax on used vehicles and the transfer tax on real estate.

But which municipalities benefited the most from the unconditional transfer and which benefited the least? Tirana, as the municipality with the highest population, received the highest fund of about 5.2 billion lek for 2024, followed by the Municipality of Durrës with nearly 2 billion lek, then comes the Municipality of Elbasan, which benefited 1.5 billion lek, the Municipality of Shkodër 1.4 billion lek, about 1.3 billion lek went to the Municipality of Vlora, 1.1 billion lek to Kamza and 1 billion lek to the Municipality of Korçë.

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