Collecting and distributing royalties in LGU

Collecting and distributing royalties in LGU

During May 2017, to support the tasks deriving from the 2015 EITI Report and the issues identified in 2016 for the collection and distribution of royalties in the extractive industries areas, a working group of the EITI Albania Secretariat had undertaken working meetings with leaders in LGUs of the municipalities of Librazhd, Prenjas, Pogradec, Kukës and Krume (Has).

On November 27, 2014, the Albanian Parliament adopted amendments to the Law on National Taxes. According to the changes made during 2015 the LGUs have the right to receive 5% of the royalties generated by the manufacturing companies in their areas, regardless of any planned transfer in accordance with the annual budget law.

In organized meetings and especially in addressing the problem of royalties with the local finance and tax directorates we had questions and discussions and reflected good experience of some LGUs on the situation and resolving the opportunities for further improvement in the practice of enforcing laws, guidelines of the rules in force for this important problem identified especially with Directive no. 26, dated 4.9.2008 “On National Taxes”, as amended. According to this directive, the LGUs should carry out reconciliations with the regional tax and customs departments at the end of each month and initiate these reconciliations with the General Budget Directorate at the Ministry of Finance. At the same time, regional tax and customs directorates should send within month analytical information on the collected royalties and beneficiary LGUs. On the basis of reconciliations, the Ministry of Finance performs the royalties’ transfers to the beneficiary LGUs in the following month. The Directive serves to apply both to LGUs in mining and hydrocarbon areas.

According to the 2015 EITI Report, the royalties collected for MoF has been distributed and transferred to the LGUs at 3.5% versus 5% provided by law (2.57% in mining areas and 3.75% in hydrocarbon areas). By the end of this year there were still 77.4 million ALL to be distributed in accordance with the Law on National Taxes and relevant directives.

From 2011 to 2015 the trend of mining royalties transfers to LGUs is significant, but estimates still show work to be done towards law enforcement and improved financing for LGUs with revenues generated by mining and hydrocarbon resources of the areas they administrate. Dealing with this problem with the MoF states that these disregarding of the mining royalties transfers are expected problems during the first year of implementation of changes in the law and that it will present necessary adjustments to regulatory acts and related procedures. This shows and is a more opportunity for LGUs to fund projects benefiting the community. Is this accomplished?

In the meetings undertaken with the LGUs of the areas mentioned above, the situation was reflected in a form that showed that there is still no change in this regard. There were still LGUs that had no announcements or transfers for 2015 and full reconciliations for 2016, letters sent by LGUs to the MoF sectors did not receive any response, no new regulations or seminar to clarify and find solutions for previous and subsequent periods with LGUs. Of all the recorded data for LGUs contacted above, reconciliations and transfers reflected this period only in 2017.

A fair request that was highlighted in the organized meetings was related to the full coverage and publicity of the collection and distribution of the royalties for each LGU in the mining areas, a requirement that will be followed and implemented.

These are problems and the progress so far. Our meetings and efforts to foster co-operation between the parties to reconcile the data and achieve the best results will continue, being convinced that in the 2016 and 2017 EITI Reports will reflects the performance of the best results achieved  for the communities of extractive industries.

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