Ministry of FinanceMinistry of Finance

and and the municipalitthe municipalityy BAR BAR

Secretariat for Economy and FinanceSecretariat for Economy and Finance

An example of good An example of good practicepractice

MUNICIPALITY OF BARMUNICIPALITY OF BARProjects: The real estate Projects: The real estate

taxtax

Market Value-Based Taxation of Real Property, Market Value-Based Taxation of Real Property, Ljubljana,April 11-15,2011Ljubljana,April 11-15,2011

Acting Secretary'sActing Secretary's

Klikovac Dejan Klikovac Dejan MM.Sc..Sc.

Law on Property Tax

Montenegro is a country with about 620,000 inhabitants and is divided into twenty-one (21) units of local government.

The reform of the tax system in Montenegro, as well as the overall financial system, begins in year 2001. The main goals of tax reforms are aimed at making the tax system simpler, more efficient and easier to implement and that the tax reform based on principles of simplicity, fairness, neutrality, efficiency, stability and applicability.

Tax on property regulated by the Law on Property Tax ("Official. Gazette of RM" no. 65/01, 69/03 and 75/10), which entered into force on January the 1st 2001, effective from January the 1st 2002, the Decree on detailed criteria and methodology for determining the market value of real property ("Off. Gazette of RM" no. 23/03, 25/04, 40/04, 60/04 and 31/05) and the Regulations on the contents of the report on tax payment real estate ("Off. Gazette of RM" no. 33/05). On the basis of the Law and Regulation municipalities have adopted their own decisions on the introduction of property tax.

Law on Property Tax The new legislation committed the harmonization of tax treatment of real estate in

Montenegro with international practice. The basic characteristics of international practices in property taxes as soon as can be summarized as follows:

-Property tax is the only municipal tax and the taxpayer knows who is taxation, which amount to pay and what the purpose of payment of taxes is

-Taxpayer is clear what is taxed and how to determine tax liability-Tax structure should be clear with few rates, exemptions and special treatment and release all taxpayers in the same way-Tax should be easily applicable and understandable to the taxpayers and the tax authorities-Municipal authorities are responsible for council rates and have the authority to set rates that are in accordance with municipal decisions.

Subject to taxationProperty tax paid on real estate located in Montenegro, including: land, buildings, residential buildings, business units and other buildings. Buildings and other buildings that are in separate ownership of land and housing units of buildings can be taxed separately.Tax BaseThe base property tax is the market value of the property at January the 1st of the year for which the tax is assessed. The main criteria for determining the market value of real estate is: allocation of real estate, property size, location of the immovable property, the quality of real estate and other elements that may affect the market value of real estate.

Detailed criteria and methodology for determining the market value of real property prescribed by the Government of the State of Montenegro, the proposal by the Minister of Finance. The methodology aligns with market conditions, at least once in three years.Obligations from real estate tax occure January the 1st of the year for which the tax is assessed.Market value of individual property, based on this methodology determined by the competent tax authority of local governments.

IntroductionIntroduction- - municipalitimunicipalitiyy of of BARBAR **Bar a modern city with wide boulevards,surrouned by

Mediterranean vegetation,Bar represents the biggest tourist and nautical centre at the entrance to the Adriatic Sea.Two equally beautiful shores in the Municipality of Bar,those of the adriatic sea and Lake Skadar.

**Secretariat of Economy and Finance consists of three Secretariat of Economy and Finance consists of three departments and the Finance Department, department of local departments and the Finance Department, department of local government revenues and the Department of Economics.government revenues and the Department of Economics.

* Projects: property tax, treasury and municipal power* Projects: property tax, treasury and municipal powerCooperation - GTZ, SNV-property taxCooperation - GTZ, SNV-property taxCooperation with the Urban Institute-TreasuriesCooperation with the Urban Institute-Treasuries

* Adapted from the base year 2003, the Directorate of Public * Adapted from the base year 2003, the Directorate of Public RevenuesRevenues* The first software for corporate real estate ICMA* The first software for corporate real estate ICMA   When transferring a database ICMA has made mistakes which    When transferring a database ICMA has made mistakes which caused delay in the work, and the software was not multi-usercaused delay in the work, and the software was not multi-user* The current software TerraSoft (application PN), Safe Software* The current software TerraSoft (application PN), Safe Software

SSCHEDULE OF COMPUTER-TAX ON REAL ESTATE AND CHEDULE OF COMPUTER-TAX ON REAL ESTATE AND TREASURY IN THE MUNICIPALITY OF ELECTRONICTREASURY IN THE MUNICIPALITY OF ELECTRONIC

10 licenci ETERRAPN + 2 TT 10 licenci ETERRAPN + 2 TT USER REAL USER REAL

ESTATEESTATE JMBJMBGG

Details ofDetails ofEletronicEletronic ADDRESS OF REAL ESTATEADDRESS OF REAL ESTATE

Area m2Area m2 sekretarsekretaryy NO FLOOR PLAN, LOTS, LISTNO FLOOR PLAN, LOTS, LIST IT ADMINISTRATORIT ADMINISTRATOR

KAKADDASTARASTAR

SERVERSERVER

accountaccount

SERVERSERVER

cuttingcutting DATA ENTRY, PRINTING SOLUTIONS, UPDATESDATA ENTRY, PRINTING SOLUTIONS, UPDATES CHANGES, THE PARTIES ..CHANGES, THE PARTIES .. server server e-Municipalitye-Municipality CHIEF ADMINISTRATOR (SECOND-CHIEF ADMINISTRATOR (SECOND-

INSTANCE)INSTANCE)

10pc10pc The Citizens BureauThe Citizens Bureau Legal ServiceLegal Service

+T+Treasuryreasury Protocol number, date of the decisionProtocol number, date of the decision

Positive experience-Germany WisbadenPositive experience-Germany Wisbaden                (records a bit .. every tree has a                 (records a bit .. every tree has a number)number)

They can easily lead to the spread of computers They can easily lead to the spread of computers connected to the network. (The whole connected to the network. (The whole municipality is networked)municipality is networked)

On the server operating SQL and Oracle 9i On the server operating SQL and Oracle 9i databasedatabase

Cadastre in the same building, LAN Cadastre in the same building, LAN --Local Area NetworkLocal Area Network ....

The implementation process is not easyThe implementation process is not easy Zone by the number of plotsZone by the number of plots

Treasury operationsTreasury operations The project of effective local government, Urban Institute in the The project of effective local government, Urban Institute in the

municipality of Bar is carried out a pilot project-introduction of municipality of Bar is carried out a pilot project-introduction of local government treasury. Municipality of Bar is the first in local government treasury. Municipality of Bar is the first in Montenegro started with the implementation of treasury systems Montenegro started with the implementation of treasury systems 01.januara 2005.01.januara 2005.The primary purpose of the treasury of local government to The primary purpose of the treasury of local government to improve the implementation of financial management at district improve the implementation of financial management at district level in available funds.level in available funds.This is primarily achieved by introducing modern financial This is primarily achieved by introducing modern financial management information system that includes computerized management information system that includes computerized accounting, based commitments and spending control, a system accounting, based commitments and spending control, a system for cash and debt management and financial reporting. for cash and debt management and financial reporting. (timeliness, reliability, clarity, simplicity, transparency)(timeliness, reliability, clarity, simplicity, transparency)Treasuries based on the principle of carrying only recording of Treasuries based on the principle of carrying only recording of cash transactions through the Consolidated Treasury Account, all cash transactions through the Consolidated Treasury Account, all in accordance with the Law on Local Government Finance, in accordance with the Law on Local Government Finance, Instruction on the Treasury and international accounting standards Instruction on the Treasury and international accounting standards for the public sector.for the public sector.REPORTS DAILY, WEEKLY, MONTHLY, YEARLYREPORTS DAILY, WEEKLY, MONTHLY, YEARLY

Treasury operationsTreasury operations

Consolidated treasury account includes all accounts on which is recorded the state money, which are a function of the municipality or the consolidated treasury account shall be paid all remuneration and from all payments from the budget.Treasury is realized through the exercise of the following functions, namely:Financial PlanningCash managementExpenditure ControlDebt ManagementBudgetary accounting and reporting andFinancial management information systems

Analysis of charge € property tax collection at 31.12.Analysis of charge € property tax collection at 31.12.

2009 2010 %1716903 2628495,33 153,10

COMPARISON OF THE LAST TWO YEARS

2010 a record year in the charge up NOW

3117082,76

2628495,33

1716903,24

1215967,991077239,401156968,46

856480,27

409180,02

0,00

500000,00

1000000,00

1500000,00

2000000,00

2500000,00

3000000,00

3500000,00

2003 2004 2005 2006 2007 2008 2009 2010

PAYMENT

Analysis of charge € property tax collection as of Analysis of charge € property tax collection as of 0202.0.044..

232765,54

102351,86

224631,85

130766,54

80950,92122516,03

86051,27

4535,50

277746,87

0,00

50000,00

100000,00

150000,00

200000,00

250000,00

300000,00

2003 2004 2005 2006 2007 2008 2009 2010 2011

PAYMENT

Chart supervise the collection of property tax in the year Chart supervise the collection of property tax in the year

2007,2008,20092007,2008,2009,2010,2010   JAN FEB MAR APR MAJ JUN JULY AUG SEPT OCT NOV DEC TOTAL

2007 73362 31767 24882 21702 35822 75371 158047 261202 189762 94415 101152 148507 € 1.215.991

2008 112689 60058 93559 82617 37402 60086 138445 278076 315506 191672 154091 192719 € 1.716.920

2009 40744 48927 34806 130629 64167 249219 257955 582930 370071 284604 246703 317740 € 2.628.495

2010 57598 69773 114679 64458 106363 209303 486066 529183 308746 598341 205602 366970 € 3.117.082

0

100000

200000

300000

400000

500000

600000

700000

JAN FEB MAR APR MAJ JUN JUL AVG SEPT OKT NOV DEC

2007 2008 2009 2010

total

0 €

500.000 €

1.000.000 €

1.500.000 €

2.000.000 €

2.500.000 €

3.000.000 €

3.500.000 €

2007 2008 2009 2010

2007

2008

2009

2010

0

100000

200000

300000

400000

500000

600000

700000

JAN FEB MAR APR MAJ JUN JUL AVG SEPT OKT NOV DEC

2007 2008 2009 2010

TrainingTraining

Information system contributes to the improvement Information system contributes to the improvement of collection, enforcement needed .. mortgages ..of collection, enforcement needed .. mortgages ..

realizes the process of training staff (ECDL and realizes the process of training staff (ECDL and others)others)

UUnderstanding of relevant, especially the Mayor, nderstanding of relevant, especially the Mayor, Zarko Pavicevic contributes to efficient removal of Zarko Pavicevic contributes to efficient removal of barriers that occur in this jobbarriers that occur in this job

Good cooperation with the Service Chief Good cooperation with the Service Chief Administrator, the appellateAdministrator, the appellate

Knowledge, efficiency, project guillotineKnowledge, efficiency, project guillotine LONG-TERM PLANLONG-TERM PLAN

Great effort, Great effort, jobjob, database should handle, database should handle Faster work performance, satisfaction?Faster work performance, satisfaction?

PlansPlans Project Project ......FisFiscalcal Cadastre-TAX Cadastre-TAX

LAMP-LAMP-Land Administration and ManagementLand Administration and Management project(World bank)

INSPECTION-in during last 12 months found in the field of INSPECTION-in during last 12 months found in the field of new ca .. 300.000m2new ca .. 300.000m2.... DAILY REPORTS DAILY REPORTS

(there are illegally built objects that are not registered, the (there are illegally built objects that are not registered, the number of objects in the records has a much smaller number of objects in the records has a much smaller surface area than the actual on the ground, a number of surface area than the actual on the ground, a number of buildings and land in the base (real estate management) buildings and land in the base (real estate management) lead to the wrong purpose (business and residential, lead to the wrong purpose (business and residential, construction, ruins, culture, land ..)construction, ruins, culture, land ..)

Reduce the tax base and Reduce the tax base and it is it is filled filled byby all taxpayers all taxpayers

TEAM WORK VERY IMPORTANTTEAM WORK VERY IMPORTANT

REPORTS ON MUNICIPAL TAX ON REAL ESTATE FOR 2010.

Serial n.name of the

municipality

the amount of market value

amount of

the tax amount of

tax collecte

d other billing

Collection

rate BUIDINGS LAND TOTAL

1 Andrijevica 106.685.968 157.862.649 264.548.617 99.977 41.970 58.007 41,98

2 Bar 3.162.834.557 551.287.738 3.714.122.295 4.447.374 3.107.684 1.339.690 69,88

3 Berane 378.346.353 618.696.783 997.043.136 411.820 128.014 283.806 31,08

4 Bijelo Polje 839.281.959   839.281.959 657.819 210.967 446.852 32,07

5 Budva 3.434.020.805   3.434.020.805 5.930.859 4.565.549 1.365.310 76,98

6 Danilovgrad     0 214.502 96.809 117.693 45,13

7 Žabljak 120.750.511 10.656.200 131.406.711 183.702 105.921 77.781 57,66

8 Kolašin 868.593.806 1.624.896.366 2.493.490.172 875.236 735.591 139.645 84,04

9 Kotor 1.203.937.750   1.203.937.750 1.627.022 942.623 684.399 57,94

10 Mojkovac 131.907.704 345.620.350 477.528.054 189.801 88.359 101.442 46,55

11 Nikšić 1.287.091.032 4.878.094.922 6.165.185.954 4.491.809 2.785.059 1.706.750 62,00

12 Plav 297.156.859 309.532.058 606.688.917 239.822 109.893 129.929 45,82

13 Plužine 164.216.365   164.216.365 1.141.256 1.421.958 -280.702 124,60

14 Pljevlja     0 221.620 76.041 145.579 34,31

15 Podgorica 6.097.326.679 156.365.976 6.253.692.655 6.713.139 2.415.730 4.297.409 35,99

16 Rožaje   265.898.052 265.898.052 188.290 39.533 148.757 21,00

17 Tivat 1.029.026.022 739.941.980 1.768.968.002 1.568.699 1.010.398 558.301 64,41

18 Ulcinj     0 1.560.260 811.829 748.431 52,03

19 H.Novi 1.514.635.104 976.029.060 2.490.664.164 2.977.957 2.230.774 747.183 74,91

20 Cetinje     0 457.009 136.736 320.273 29,92

21 Šavnik 25.746.569   25.746.569 61.065 15.867 45.198 25,98

  UKUPNO: 20.661.558.043 10.634.882.134 31.296.440.177 34.259.038 21.077.305 13.181.733 61,52

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