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North Macedonia's New Law of Solidarity Sets Dangerous Precedent with Unconstitutional Retroactive Effect

North Macedonia's New Law of Solidarity Sets Dangerous Precedent with Unconstitutional Retroactive Effect

North Macedonia
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The government of Republic of North Macedonia recently introduced a new tax law for solidarity, in an effort to address the consequences of the crisis. In response to the difficult economic and energy crisis faced by vulnerable citizens, as well as companies that have experienced significant increases in revenue as a result of the crisis, the government has implemented a series of measures including subsidies, social protection, tax exemptions, and financial support for domestic energy companies.

The new tax law for solidarity is a one-time public contribution for the year 2023, which will contribute to the Republic of North Macedonia's budget. The taxpayer for the solidarity tax is the taxpayer for the income tax as specified by the Income Tax Law, who achieved a total income in 2022 greater than 615,000,000 denars or 10.000.000 EUR. The tax base for the solidarity tax is calculated by reducing the tax base specified in the tax balance for tax calculation.

The main goal of this new tax law is to address the disparities in the market caused by the crisis, and to provide support to those who are socially threatened by the crisis while collecting revenue from those who have seen significant increases in income. The government believes that this new tax law will help mitigate the effects of the crisis and promote a more equitable distribution of resources.

But, this recent change in tax legislation has sparked controversy and concern among the experts. The change, which retroactively affects income and profits from before its implementation, has been widely criticized for its retrograde nature. Critics argue that the new law undermines the principles of fairness and equality, as it unfairly penalizes those who make profits, pay the tax and have already completed financial transactions based on the previous tax code. This retroactive application of the law creates a sense of unpredictability and undermines the credibility of the legal system.

Furthermore, this change in tax legislation is very likely to be challenged in front of the Constitutional court, as it violates the principle of legal certainty and the right to property. The retroactive nature of the law is a clear breach of the constitution and constitutes a threat to the rule of law.

It is imperative that the government takes into account the serious concerns raised by the experts regarding the recent change in tax legislation.

By Martin Boskoski, Founding Partner, Lalicic & Boskoski Law Office