AmCham
Editorial Greetings dear friends ith the election campaign, which has started earlier than before, we are entering in the season of promises and convergence between the politics and citizen. This convergence and this dialog initiated by the majority of political parties in order to “hear” citizens’ concerns, represents in the economical aspects a finesse move by political parties in order to convince us to “buy” their concepts and in return, to give them the most precious thing in the democratic system - our VOTE. In principal, politics and promises work in the same way in all democratic systems, thus we do not need to spend too much time talking about this phenomenon. However, my concern lies on the promises made which do not correspond to the reality and neither comprise on themselves an explanation or plan on how those promises are going to turned into a reality. Those who are involved in business, or the ones who represent business interests, have understood a long time ago that in order to make a difference and initiate a change, even a minor one, it requires energy, time, and effort. Meanwhile, those who usually stand in front of change initiatives are exactly the ones who were promising to us that they were going to transform a couple of years ago. Even this time and not differently, we do not need to ask for anything during this election campaign. This is due to the fact that promises are flooding and coming to us whereas some political parties are offering something which we never asked for; at the same time, other political entities are vowing to change in the next governmental term whereas not giving us a reason why they did not do the same during the time they actually were in power. In the economical aspect, I can not still understand how a political party promises higher pensions, lower taxes and a decreased VAT while not showing how they are going to manage to collect money for the Consolidated Kosovo’s Budget, for the administration, for government expenditures, for their vehicles, cell phones, or even their lunches. Or, the money is going to be collect according to some unwritten rules after we have voted them? It would be very interesting to listen to how political parties, which are intending to seize the reign of the government, are considering to face budget limits posed by International Monetary Fund and existing budget constraints. A major economical issue for the government is hiking prices of goods in Kosovo, a problem which evidences our lack of financial concept and political vision to deal with this crisis. In the financial aspect, we are deficient in allocated reserves which would serve in resolving these crises while the issue of reserves is closely related to the status. Additionally, in the political and governmental aspect, we have no mechanisms to intervene at all. Hence, why we talk and promise starts in the sky while we can not keep stones in the ground? For the political parties which are running in these elections, Kosovo in itself is facing many challenges; however, in the list of priorities, except the status, political parties that are aiming to govern in the future, shall put into their agenda-setting the war against poverty and the immediate assistance for the families that will have trouble making out of this winter. As a modest step in the beginning, the establishment of the fund for fighting against poverty or the creation of a budget from selling some of the numerous Administration’s vehicles would be signals that willingness for change exists.The poverty which is getting worse day after day, and the luxury of our officials, who do not deserve to be in those positions, are very concerning for the future of our country. The cross-road which we are approaching has two signs: either the fiasco state which is characterized by the crime, corruption and the crisis which is getting worse every day, or the attempts for a state with law and order – which road is going to be filled up with threats from those who will be denied from the right of getting rich overnight. The first choice, that is the fiasco state, will be accompanied with worse poverty situation, misery and destabilized political situation. The second alternative will be an adjunct to hard work in the founding of a proper state (this time, by Kosovars); however, every single second of this work will be valuable and will be rewarded in the future. Dear friends, from what we hear and see, I understand political parties’ quest for power and positions; nevertheless, I never quite understood (hopefully I will recognize this during this election campaign) how are they going to administer with this power? How they are going to deal with thousands of inexperienced of civil servants who work nothing and hold positions within the governmental institutions. How they will manage to solve the chaos in health and educational system? When we are going to get rid from the mud in our shoes? We can see the beautiful scenes only on election campaign commercials or ads; however, the question arises: When we will see them in reality? This remains to be seen after the elections and, hopefully, after the resolution of the final status…
Inside
W
Cheers to the coming election
Mimoza Kusari-Lila
-13
page 04
Analyses -19
page 16
Flash Business News -23
page 21
Fun Page -25
page 24
AmCham 'Kosovo Business Journal' is a primary forum for economic analyses, news, and viewpoints as well as for the presentation of new business opportunities. EDITORIAL COMITEE American Chamber of Commerce in Kosovo Gustav Majer STR. No 6 Prishtina, Kosovo, 10,000 Phone: 038 246012 Fax: 038 248012 e-mail: newsletter@amchamksv.org www.amchamksv.org Editor: Mimoza Kusari – Lila Newsletter Coordinator: Mentor Mehmedi Writers: Mentor Mehmedi, Jeta Zagragja, Eliana Naka, Shkumbin Hoxha Advertising: Jeta Zagragja Jeta.Zagragja@amchamksv.org Layout & Production ashagraphics.com Comments, Suggestions, Writings: @ AmCham Kosovo, kbj@amchamksv.org
3
Kosovo Busniess Journal
AmCham
Inside
by Mentor MEHMEDI n the wake of engagement on introducing the concept of Proper Business Ethics to the Kosovar business community, American Chamber of Commerce in Kosovo in cooperation with the U.S. Office in Prishtina organized for the first time the Business Ethics Week which took place from October 1st through October 4th. The Guest Speakers in the Business Ethics Week included Dr. Anita Baker, an expert on Corporate World’s impact in promoting business ethics values and proper business conduct in general, and Don Eberly who has an expertise in the role of civil society in transitional economies in strengthening social values, establishing private philanthropy and developing non-profit community organizations. In the first day of the Business Ethics Week, the activities included meetings of Dr. Anita Baker with AmCham Board Members, with the director of Kosovo Anti-Corruption Hasan Preteni, and with the head of Anti-Corruption Organisation “Çohu,” Avni Zogjani.
I
The second day of the Business Ethics Week was characterized with
Don Eberly Author, Civic Entrepreneur, Advocate Don Eberly is a nationally and internationally noted author, civic entrepreneur, and advocate for civil society and private philanthropy. His career includes a decade serving in senior policy positions in the Congress and two administrations, and another decade advocating for and creating non-profit organizations to strengthen community and civic life. Through hundreds of articles, essays and interviews, Eberly has advocated the "third way" of relying more on voluntary civic institutions, or "mediating institutions," to meeting pressing social and humanitarian needs, to strengthen democracy at home and abroad, and to promote the renewal of core values. Eberly holds masters degrees in fields of government from George Washington University and the Kennedy School of Government at Harvard University, and has done Doctoral studies at the School of Public Affairs at Penn State University. numerous activities. Dr. Anita Baker together with AmCham Kosovo Executive Director Mimoza Kusari – Lila met with representatives and students of Kosovo Journalism Institute (KIAC) where they discussed the importance of good ethical practices in journalism and in business. The activities continue in a good pace as planned ahead. Dr. Anita Baker
visited American University in Kosovo Campus in Germia where she held a speech in front of American University of Kosovo’s students. She elaborated the importance of several issues regarding ethics in
4
Kosovo Busniess Journal
AmCham
Inside
businesses and what it takes for businesses and corporations to follow up with good businesses practices. Then, Dr. Anita Baker met with the professors of American University in Kosovo and Royal University “Iliria.” The emphasis of this working lunch was on how universities can incorporate the Ethics course in their curriculums, what resources are needed, and what are the examples from other countries which can be taken as role models. At the end of the second day of the Business Ethics Week, Dr. Anita Baker and Mimoza Kusari-Lila met also with representatives of Kosovo Trust Agency. The Business Ethics Week processed further in the next day with the Business Ethics Conference and, on Thursday, October 4th, with Kosovo Business Leadership Forum
by Shkumbin HOXHA he American Chamber of Commerce in Kosovo in cooperation with the US Office in Prishtina organized the Business Ethics Conference, an integral part of Business Ethics Week, with the purpose of shedding light on a large scope of ethical issues, which the Kosovar business community is continuously faced with.
T
The Conference was intended to serve as a channeling tool for all the companies and organizations that needed assistance in resolving ethical issues from within, and, it was also intended to be a place
Anita B. Baker, Ph.D. Dr. Anita Baker has extensive practical experience in developing and implementing business ethics programs for both the private and public sectors. She is the former Manager of the World Bank Group’s Office of Business Ethics and Integrity. Previous to the WBG, she held various senior management positions during the 14 years she worked at the Lockheed Martin Corporation, including Sector Director, Ethics and Business Conduct, Lockheed Martin Corporation, Bethesda Maryland. Before joining Lockheed Martin, Baker was a tenured Associate Professor and a Director of International Education,The University of Utah; Assistant Dean, Undergraduate Faculty, The University of Maryland University College; and Chairperson, Advanced Scandinavian Area Studies, School of Area Studies, Foreign Service Institute, U. S. Department of State, Washington, D.C. Dr. Baker received her B.A. from Goucher College and Princeton University, and her Ph.D. from Cornell University. She conducted scholarly research in the Former Soviet Union, Romania, Bulgaria, Finland, and Denmark on issues in economic development.
where new ideas and visions would be shared for the future. In this gathering, present were representatives from the Ministry of Trade and Industry,Tax Administration, USOP, Representatives of Pillar IV, as well as other representatives from different companies and organizations. Noticeable guest speakers were Dr. Anita Baker and Mr. Don Eberly, experts on ethics and the private sector, respectively. Mimoza Kusari-Lila, the Executive Director of AmCham Kosovo, held welcoming remarks and
thanked all the guests for being present in this conference. After some brief remarks, she then presented, in front of a semipacked hall, Mr. Joachim Ruecker, the Special Representative of Secretary General of UN. The “King”, as he was jokingly referred to by the AmCham Director, emphasized the importance of ethics in Kosovo, noting that since Kosovo is in a transitional state, misconducts might possibly occur more often than in non-transitional ones.
5
Kosovo Busniess Journal
AmCham
Inside
Nonetheless, Mr. Ruecker claimed that mechanisms to prevent corruption, misconducts and other mischief should be firmly put in place in order to counter them. Additionally, it was stated that this Conference was a muchneeded tilt towards waking up the business community regarding ethics in their respective operations. Mr. Ruecker admitted that plenty of work lies ahead for the Kosovar business community, but with each day passing by small changes are slowly starting to shape and guide the Kosovar economy in the right direction. The AmCham Executive Director was invited one of the USOP representatives, Mr. Tommy Yatzgerdi, to say a couple of words. Mr. Yatzgerdi talked about the importance of ethics not just in Kosovo, but also the profound effects it has globally. The initiative of organizing such an event was welcomed and he was not short of encouragements towards organizing similar Conferences in the near future. The two guest speakers, Dr. Anita Baker and Mr. Don Eberly, then consecutively proceeded to conduct their presentations. The relatively high length of their appearance of the stage was not a hindrance to the performance of the conference at all, since their presentation material was received as very exciting for the audience. The report, which AmCham had prepared beforehand, was presented to the
audience by Shkumbin Hoxha and Mentor Mehmedi. The presentation entailed the statistical data pertaining to the report itself, with all the audience having a hard copy of the report at their disposal. After a refreshing coffee break, the participants returned to the Conference Hall with the prospect of splitting into two separate focus groups for the
remainder of the Conference. Dr. Baker conducted one of the focus groups’ discussions, mainly comprised of owners of private firms, and Mr. Eberly duly played his part in the other group, with the majority being composed of institutions’ representatives. Judging by the interaction and activeness of the groups it would be fair to say that the sharing of ideas and experiences was plentiful. The conclusion of the groups’ discussion marked the end of a very exciting Conference, where many of participants urging and encouraging the organizers to repeat such an event in the near future.
6
Kosovo Busniess Journal
AmCham
Inside
Kosovar
Business
by Mentor MEHMEDI s the transitional economy, Kosovo is facing many challenges to overcome. One of the challenges high up in the priority list of issues is the problem of ethics in business which is influencing heavily the general business conduct and practices in Kosovo.
A
During the Business Ethics Week, held from October 1st through October 4th, 2007, was established also the Kosovar Business Leadership Forum (KBLF) with the aim of promoting proper business conduct and good practices in the Kosovar society. The establishment of the Kosovar Business Leadership Forum was strongly supported by the Kosovo Foundation for Open Society (KFOS). KFOS supported the preparation and the publication of the Baseline Report on Business Ethics in Kosovo, the report compiled based on the research conducted by the American Chamber of Commerce with 50 different businesses. The Executive Director of
American Chamber in Kosovo, Mimoza Kusari-Lila held the opening remarks regarding the importance of establishing such sort of forum in our business community. She emphasized the role of similar forums in other countries and their significance in aiding economic and sustainable development. There were 28 businesspersons, representatives from governmental and non governmental institutions as well as from social society, who participated in the inaugural meeting of the KBLF. They all agreed regarding the importance of this forum and the value it will add to our business community. They agreed upon the point that this forum is bound to be a place where Leaders of the Kosovar business community would have the chance to discuss the possibilities of incorporating the Corporate Social Responsibility concept into our business community, undertake initiatives on accomplishing similar goals, and make the public opinion aware of the benefits and consequences of employing this concept and similar ones which deal directly with ethics in business.
After the meeting kicked off, participants discussed about what are the current obstacles that businesses are facing while strived to identify the channels to tackle these issues. The lack of legal infrastructure in Kosovo and the existence of very little involvement from businesses in public policy – making process were considered quite problematic. Two guests speakers in the Business Ethics Conference, Don Eberly and Anita Baker praised this initiative undertaken by AmCham Kosovo while considering it as crucial to the development of Kosovo economy. They brought up many examples from foreign countries where these sorts of forums are having major positive influence. Lack of institutional responsibility, the almost non-existence of transparency, the desperate need for economic data and indicators, corruption, environmental
7
Kosovo Busniess Journal
AmCham
Inside
issues, major international barriers (bank transactions, lack of international agreements) are just some of the issues which are causing a major headache to the business community Participants were on the same state of mind while stating that cooperation and collective bargaining among businesses are two crucial tolls that can used by the business community to tackle the aforementioned problems. Then the discussion turned to the need for promoting values and good business practices. A real life question was brought to the attention of the participants: What can businesses do in promoting good ethics in business? Fighting the misconduct, respecting and obeying the laws, launching a transformation within businesses, initiating certain laws and regulations as well involving big businesses in this process, which can give a huge contribution to this cause, were some of tasks put high up in the priority of lists. Business leaders and representatives from the government and social society elaborated also on the short and long term goals of KBLF. They agreed upon starting
with modest initiatives such as helping teaching in schools and providing schools with several computers while at the same time striving to accomplish big project in the future. As one of the long term goals was mentioned the establishment of public-private partnerships, recruiting young people, and giving assistance in building a strong generation of leaders.
vember and the agenda for this meeting will be: to determine the mission and vision of this forum and establish the Corporate and Associate committees along with the working groups of KBLF.
A forum where the business community, the government, and social society will keenly participate and bargain together is what our economy needs right now. The first meeting of the Kosovar Business Leadership Forum (KBLF) ended on good notes. The Forum will meet again during the first week of No-
8
Kosovo Busniess Journal
AmCham
Inside
Prishtina, October 19, 2007 merican Chamber of Commerce in Kosovo meet with the 13 well-known international CEOs, most of them coming from prestigious U.S. corporations, and who compiled the delegation of Business Executives for National Security (BENS) Delegation, a group of CEOs which visited Kosovo as part of their Balkans tour.
A
Present in this working lunch were members of American Chamber of Commerce in Kosovo, the representative of Kosovar Agency for Investment Promotion as well as businesspersons and entrepreneurs from the business community.
The meeting was very successful and honest while the BENS delegation used this lunch as an opportunity to get to know more about economic and political development of Kosovo, and breakthroughs which exists for American investments in this part of South-East
Europe. BENS Delegation, after returning to States, will offer recommendations to the US Government and US Military regarding numerous issues which are directly related to Kosovo and the region. by M.M
9
Kosovo Busniess Journal
AmCham
Inside
AmCham Conference
on Regional Trade, Investment and Intellectual Property Rights October 5, 2007 Ohrid, Macedonia embers of the American Chamber of Commerce in South East Europe attended the regional conference in Macedonia on October 5th, 2007. The conference was co-sponsored by the American Chamber of Commerce in Macedonia and the Embassy of the United States in Skopje, Macedonia
M
Seven members of the American Chamber in Kosovo such as Llamkos, Meridian, Apollonia, Xella, Conin, Smart Investment Group, and Gail Warrander attended this regional conference in Ohrid. Participants in this conference discussed regional issues of trade, investment, and intellectual property rights enforcement. The confer-
ence sessions consisted of interactive panel discussions involving 4 to 5 experts from a broad range of institutions. The conference also included substantial opportunities for informal discussions between AmCham members.
10
Kosovo Busniess Journal
AmCham
Inside
e in merc tom o Oc f C er o eginning r t to b m a o b Ch end, ” Ski Res tratk can e i e r s o e w v f Am d” for the n “Mavro develop a o f f i e d ta he s o “retreat ctober 7, goals an v m O o r Kos through long-te plan d game ided ber 5 -term an goals. a e evis rov ese hor t t to d retreat p orkings out s mplish th h g p u a m o tho rw . The o acc t was ext year d the inne issues and a e r egy t t re en aey tan rking n over th to unders identify k ork and c o w o s Thi ganizati rtunity ization, f teamw rgan oppo nse o ur or for o s with an l in our o ering a se a u t comr e all of h individu while fos b s m , c sines a me of ea bjectives DA, iner in bu reM o f tra es o ham main erie. er vic tator and the AmC s d e a r h ma ted t facili s for selec tion, as a m result m a u h a AmC r organiz the optim u e o r of su pany ics, to en m dyna . treat
T
11
Kosovo Busniess Journal
AmCham
Inside
KOSOVO Prishtina – September 28, 2007 merican Chamber of Commerce in Kosovo and Raiffeisen Bank have signed the mutual agreement on finalizing the Charitable Project for the Pediatric Center in Prishtina. During this ceremony, the executive director of AmCham Kosovo Mimoza Kusari-Lila and the director of Raiffeisen Bank Oliver Whittle also singed individual contracts with Academy of Arts’ students, whose paintings were sold during the charitable auction held on 1st of June, 2007. 20 % from the selling price of each paiting will be paid to the students for their individual pieces of art.
A
The total sum of money raised from this charitable event is 70,721 EUR. After expenses and students’ paintings invoices are paid, the funds are equal to 55,487 EUR whereas not less than 199,681 EUR are requird for finalizing this paramount project. The remaing funds required for the project will be matched from the Pediatric Center’s funds while the mutualunderstating agreement was signed with the organizers of “For a Better Life” iniciative as well. The contracting and managing company of this project is CDF. The Contract of Cooperation among AmCham Kosovo, RBKO, and CDF was also signed during this ceremony. by M.M
12
Kosovo Busniess Journal
AmCham NEW COMPANY
Login Systems Introduction Founded in 1991, Login Systems is a leading regional importer and distributor of Microsoft, HP, Linksys, Nortel, Motorola, HTC, i-Mate, Intel and Seagate and a creator of innovative solutions for e-business and e-government systems. The headquarters of the company is in Skopje, with subsidiaries in Pristina, Kosovo and Tirana Albania. Our business model is to be logistics services and channel development partner/provider of world-wide ICT products. Our dealer/channel network is consisting of more than 400 independent companies that are acting as ICT dealers/resellers, VARs, system-builders, system-integrators, ISVs, retail shops for ICT/consumer electronic, and service providers. Whereas Login Systems Kosova was founded in 2006 with gala opening on 13 June 2007 bringing always the most modern technology into Kosova market also a creator and solutions for ebusiness and e-government systems. By using products and services from Login Systems’ portfolio, customers and businesses are empowered to increase their competitiveness and productivity, improve security and integrate business systems.
Vision and mission Vision Businesses and government institutions should deploy and use e business and e government solutions in order to improve its competitiveness, agility and efficiency. Mission statement Our mission is to provide world class products, innovative solutions and state-of-the-art services for e-business and e-government systems through right partnerships with independent computer companies.
Values Quality. Login Systems (like Macedonia also Kosova base) is a leading importer and distributor of the largest software company in the world (Microsoft), most successful manufacturer for com-
munication equipment (Cisco Linksys and Nortel) and HTC a convergent voice and data devices which utilise the MicrosoftŽ Windows Mobile™ operating across GSM, CDMA, UMTS and WiFi networks. Tradition. Founded in 1991, Login Systems and Login Systems Kosova in 2006 creates innovative solutions for running your business successfully and with improved productivity of your employees, it enables you to reach new markets and increase profitability already proven in Macedonia and Kosova. Confidence. As agile company with international finance investor and young, highly skilled team that uses modern standards of working combined with domestic know-how, Login Systems is confident and reliable partner for you. Market reach. Using a large partner network of independent computer companies, Login Systems make available information technology solutions through easy and fast logistics, supported by financial and professional services tailored to the needs of the customers in Macedonia, Kosova and in Albania.
Business structure Login Systems is limited liability company registered under the laws of Republic of Macedonia and founded by Venko Gligorov. In February 2002, a venture capital fund, SEAF/Macedonia, invested in Login Systems, becoming a minority partner in the company (35%). Login Systems Kosova is limited liability company registered under laws of Kosova and founded by Login Systems based in Macedonia. ,Therefore, SEAF/Macedonia is also a minor partner in the Login Systems Kosova. Promoting the development of enterprises in Macedonia, SEAF/Macedonia is commercial company affiliated with SEAF Washington, USA and founded by United States Agency for International Development (USAID), European Bank for Reconstruction and Development (EBRD), International Finance Corporation (IFC) and German Investment Company (DEG). For more info, visit:: www.loginsystems.biz/shq
AmCham
Analyses
THE FIRST STEPS by Gail WARRANDER ince mid 2006 AmCham Kosovo has focussed a lot on an area about which its members and foreign investors feel strongly - tax. In 2006 after consultations with its members AmCham published a paper which listed some suggested macro fiscal reforms as well as some concrete small-scale reforms. For a copy of this paper please contact AmCham. We also held a conference with tax experts from Slovakia and the US.
S
We are pleased to announce that two of the smaller-scale concrete reforms in this area have been recently adopted after detailed discussions and drafting sessions with TAK and representatives of the Economic and Fiscal Council (EFC) In August 2007 EFC reformed the concept “permanent establishment� by introducing two new UNMIK Regulations bringing Kosovo in line with OECD and EU standards. On 2 October 2007 TAK adopted a clearer interpretation on the recognition of foreign costs. The relevant documents can be found at:- http://www.unmikonline.org/regulations/unmikgazette/index.htm - Regulations 2007/22 and 2007/23
16
Kosovo Busniess Journal
AmCham
Analyses
What do these
for your business? U
ntil the October 2007 interpretation the experience of many AmCham members was that TAK inspectors often did not accept costs incurred outside of Kosovo as expenses which could be offset against corporation tax. The rationale given was that these costs could not be easily verified by the inspectors and the foreign companies should be registered in Kosovo.The problem was mostly with services rather than with goods (which were accepted as customs and VAT was paid). TAK applied the rule also to services provided by companies visiting Kosovo only for a few days. Such companies had no interest in registering a business in Kosovo and filing for taxes there as the administration burden was too high to be worth it. Examples of the kinds of costs which companies could not previously expense was the cost of software maintenance by specialist international companies such as SAP, Oracle, specialist machine or aircraft maintenance,technical staff training abroad e.g. in IT, management or energy know-how, costs of auditors, actuaries and international legal advisers outside of Kosovo. In one AmCham meeting we heard the sorry story of a company which had sent its IT staff to the UK for an expensive IT training course as an investment – with the plan to deploy these new skills in Kosovo, only for TAK not to recognise material investment as a business expense. The new interpretation states that costs will be recognised as proper expenses so long as they are genuinely related to the business. They must be supported by relevant documentation such as invoices and contracts. One of our members
These reforms will have a positive effect for nearly all of our members. We will explain the impact below.
has already won a TAK appeal in this area. TAK will need to recognise of course that many countries now do not use stamps and have electronic invoices.They should not expect the invoices and contracts to be exactly like in Kosovo. Equally, companies will not be able to offset the costs in two countries where they are registered in both! This would be fraud. International companies registered as a branch or a subsidiary of a group also faced the problem of TAK not recognising their inter-company agreements. Under these agreements typically the parent company invoices the Kosovo branch or subsidiary for certain central services such as group software licences, accounting, training, marketing or use of the trade mark. Such agreements are recognised under Interational Financial Reporting Standards which are applied in Kosovo. The TAK interpretation document does not specifically refer to such agreements but is hoped that the same recognition principles can be applied to such agreements. Such inter-company agreements are generally recognised by modern tax authorities provided that the basis for the charge is reasonable and justifiable.
Some agreements charge on a percentage of local turnover, others by charging a payment per customer and others work by quantifying the approximate cost of each service. It should be noted that as the interpretation goes to interpreting existing law it applies to all expenses under the Corporation Tax regime (and arguably under the prior Profit Tax regime).
The other reforms, however, only clearly took effect from August 2007. Prior to August 2007, Kosovo legislation had the effect of seeking to tax companies even though they were only present for a short period in Kosovo. This stance was out of line with OECD principles and the news was getting out with the result that Kosovo risked being black-listed as a place to supply short-term services and many major companies were refusing to services there – leading potentially to some very technical skills and services not being available to Kosovo. The Economic and Fiscal Council therefore acted and passed the two UNMIK Regulations which provide that a company need only file for taxes if it is present for more than ** days or **. AmCham would like to thank Shaqir Btyqi, Ilaz Ramalji and Gail Warrander for their help on achieving these reforms and also the Tax Administration, Pillar IV and USAID for their support.
17
Kosovo Busniess Journal
AmCham
Analyses
OTHER TAX
REFORM PROPOSALS by Gail WARRANDER hile AmCham is pleased with its successes in reform of foreign costs and Permanent Establishment (see separate article), AmCham recognises the importance of tax reforms to its members and is not stopping here. There are other tax reforms for which AmCham has been lobbying for more than a year now since our Tax Reform conference. Some of the issues we set out below. None of these are fixed in stone – we would like to engage in dialogue with the Ministry of Finance and all political parties in these areas and detailed drafting discussions.
W
Reduction in the corporation tax rate Of course we still believe that the 20% corporation tax rate is out of line with our competitor countries in the region and does not assist with encouraging foreign investors. We understand, however, the need to meet budget requirements and believe that the best approach is to increase tax receipts from the former grey market. By decreasing the rate at the same time as increasing policing mechanisms, there will be less incentive for people to take the risk of under-declaring or not-declaring and receipts should increase. We also believe that the current tax system should be
made fairer by tackling the difference between the presumptive tax rate of 3% of revenues for businesses with less than € 50,000 turnover and the 20% of profits rate for businesses
above that threshold. The evidence is that many small businesses are not so small and are illegally under-declaring or registering several businesses for the same activity. Right now there is little incentive for small businesses to grow because of the complexities and extra rates they incur if they go above the threshold. Kosovo needs stable, medium-sized businesses with proper accounts which will improve their access to finance.
Introduction of Fiscal Cash Registers We strongly support the introduction of fiscal cash registers which have been successful in Croatia, Serbia and Montenegro in increasing the VAT and corporation tax revenues because they reduce under-reporting of taxes. If these can be succesfully rolled out in a country such as Montenegro which has an even more rural and dispersed population than Kosovo and also has electricity problems, they can be rolled out here too – in phases of course! The increasing internet and cable network roll out and the mobile and fixed line coverage can only assist in this area. Kosovo can learn from the successes in the region in this area and the machines can be provided upfront on a loan basis as the tax receipts will then cover the costs
18
Kosovo Busniess Journal
AmCham
Analyses of the machine. Evidence from Serbia and Montenegro suggests increases of more than 10% of revenues in the first 12 months are realistic.
Bad Debts AmCham feels that TAK should more easily recognise a debt as a bad debt. Currently TAK require court action when many of us know this is futile and requires companies to throw more costs after something irrecoverable. Again this could be addressed by a simple interpretative guidance measure.
Double Tax Treaties One set of taxes is bad enough! No company can survive if has to pay tax twice over. Double tax treaties seek to regulate between the two countries which country taxes when. They cover in particular the situation of income tax of employees who work in two countries such as diaspora who work in Germany and Kosovo or Turkish investors who work in Turkey and Kosovo. They also regulate taxes on dividends to the foreign investor. The existence of double tax treaties is a major decision making factor for foreign investors. Kosovo has only put in place one double tax treaty – with Albania. Yugoslavia put several such treaties in place with countries such as the UK, Germany, France, Cyprus, Poland, Greece – mostly in the 1980s. Many lawyers, Kosovars and internationals, believe that these treaties should be regarded as applicable law in Kosovo as they are not discriminatory but standard form OECD model treaties. To date UNMIK has refused to confirm them as Applicable Law, while also not denying them. Our conversations with the correspondent countries such as UK and Germany has shown that they are very keen to apply the existing treaties as applicable to Kosovo – they do not wish to spend resources ne-
gotiating new treaties. AmCham has suggested to the Ministry of Finance that it could adopt the existing treaties with a new front cover or one page memorandum as treaties for Kosovo. This would be a simple practical measure. We also believe OECD model treaties (similar to those in Macedonia) should be put in place with major investor countries such as Slovenia, Turkey, Austria and Macedonia. Given the precedent of Albania, we see no need to wait for status – the Ministry of Finance should act now! Reduction of penalties and interest in the tax legislation There is a clear correlation between the cost of a service or tax and its rate of collection.We believe that there should be clear deterrent penalties which encourage payment but the high rate of Kosovo’s penalties (which are applied cumulatively – up to 25% non-declaration, up to 25% underdeclaration, 2% a month late payment and 1% a month interest) leads many companies to go for the “bribe” route or to pull the plug and go for liquidation. They are therefore counter-productive. It’s like speeding tickets. If the fine is manageable you are less likely to argue and to pay it.
VAT Reform Update The Kosovo Parliament has been working on a new VAT law which reflects the EU VAT Directive. AmCham was involved in the consultations on the draft law and a team of specialists put forward the following proposals:-
• no VAT on exports of services (the EU VAT Directive does not tax exports of goods or services). It is important that Kosovo companies can compete in this area, in particular by deploying the skills of its young people. • greater clarity about exactly when a company should register for VAT (there was some ambiguity in the draft legislation) • exemptions for books, software, DVDs, CDs and printed materials. These are exempt in many EU countries and an exemption here would help reduce prices and therefore discourage piracy as well as promote reading, education and skills training at all levels (not just at the school or university level). In practice the impact on the budget in these areas was assessed as negligible. While there were many requests for other areas to be exempt , it was felt that this risked overcomplication and increased administration and risked favouring particular industries. The new law reduces the VAT threshold to 30,000 Euros from 50,000 Euros. It is understood the law has been passed but not all of our reccomendations were accepted (for example only school educational materials were exempted). This article was written by Gail Warrander of GW Legal LLC. For questions contact her at gail@gwlegalonline.com or 038 248 342.
19
Kosovo Busniess Journal
AmCham
Flash Busniess
News
Kosovo takes steps to join WTO Kosovo's Trade and Industry minister, Bujar Dugolli, said the WTO has welcomed moves by Kosovo institutions to begin talks on entry into the organisation. According to Dugolli, Kosovo is in good position to join the WTO, since its customs code and tariff policies are fully harmonised with those of EU member states.
Montenegro's first EU step is afterthought to euro PODGORICA (Reuters) - For most European Union states, adopting the euro currency is the final step in a long and difficult journey through rigid membership rules and regulations. For Montenegro, which signed its first accord with the EU on Monday and will need years to become a member, the euro has been a reality since 2002, when it adopted the currency unilaterally. The euro sign is everywhere in the small Adriatic republic, from billboards advertising loans to cardboard price displays in vegetable markets, making it feel like any formal euro zone state.
Economists say that after teething problems in the first two years, its use motivated the government to apply sound fiscal policies and improved Montenegro's image, directly contributing to a boom in tourism and real estate. "It's great they have the euro, it makes everything so easy, and it's stable," said Briton Marie-Louise Morrison, leafing through property catalogues in the medieval town of Kotor. Montenegro's government -- not in any case in control of monetary policy, which was decided by Serbia -- weighed its options and decided to adopt the German mark, the currency of choice in a region ravaged by hyperinflation.
The Global Competitiveness Report 2007-2008 released 31 October 2007 The World Economic Forum released The Global Competitiveness Report 2007-2008 on 31 October. The Report includes The Global Competitiveness Index featuring the 12 pillars of competitiveness,The Business Competitiveness Index, detailed country profiles and data tables covering more than 100 social and economic indicators. The rankings are drawn from a combination of publicly available hard data and the results of the Executive Opinion Survey, a comprehensive annual survey conducted by the World Economic Forum together with its network of Partner Institutes (leading research institutes and business organizations) in the countries covered by the Report. This year, over 11,000 business leaders were polled in a record 131 economies worldwide
21
Kosovo Busniess Journal
AmCham
Flash Busniess
News
LONDON -European shares weakened modestly on Tuesday, as a warning from Swedish telecommunications giant Ericsson weighed on sentiment. Shares in Ericsson fell 25% after warning that thirdquarter sales, profit and margins will miss expectations due to a shortfall in mobile network upgrade sales. Ericsson's telecom
European Shares Modestly Weaker; Ericsson Shares Drop equipment competitor Alcatel-Lucent saw its shares fall 6.2% in Paris. Overall, the U.K. FTSE 100 index dipped 0.2% at 6,630.20, the German DAX 30 index lost 0.3% at 7,946.28 and the French CAC40 index slipped 0.4% at 5,785.13. http://www.foxbusiness.com/index. html
Coke goes local to w in wider m in Europe arket AMSTERD tion "Coca-C AM, the Netherlands — ola M Avra water in ," and few people think o enf Greece, or C appy juice in Croatia, or a bev Poland that pac erage called BURN in ks an But by caterin energy-filled punch. lanta-based bev g to local tastes, the Aterage giant ha s tu rope into a continent of rned Eulovers, wheth Coca-Cola er they "Coca-Cola in know it or not. Europe is no looking after t only its roots, but is producing variations and ga respecting the ining new audiences by tastes of local consumers," said Bill Bru ce Zenith Intern , managing editor of atio England, whic nal Publishing in Bath, h with an emph publishes trade journals asis on the bev erage industry. "European co ust over what they nsumers want more say Japan's Aug ll a Cola is meetin are drinking, and CocaOrders F y r g that desire," e in h c a M he Fo r C o ca -C ola, the stakes said. th n o M n ar O in Euro e co % n siderable. For 7.7 the past few ye pe st ea d il y ars, increasin ivate-- Japan's core pr offset the com g profits there have helped t HONG KONG us ug p A any's more la in ance in North cklu orders fell 7.7% A s m ce sector machinery erica. In its se ster performan ch g in is ra , th C cond-quar ter on o ca m -C ola posted a 5 results, annou from the previous leave inp ay er m ce nk n t nced ba U l in n ra cr io nt ea n ce . se s y' in tr ca un se co volume in the in July, meetthat the y da otw a r European te af anged terest rates unch a ed er id ns co h ttp://www.r orders, ock ing Thursday. The vestment, in e m at oney/stories/ ymounttelegram.com/biz/ or rp co of r to ca di in g . th leadin COX_F0754.h 2007/10/COKE_EUROP content/shared/ the previous mon in % 17 E13_ as tml h uc rose as m Jones Newswires ow D by d lle po Economists e a detimated on averag es s w ne i ke ik N and August orders. cline of 6.1% in business.com/ http://www.fox
22
Kosovo Busniess Journal
AmCham
Flash Busniess
News
Europe Eurasia Dispatch News ETS needs to be improved to have a sustainable impact on EU industry The EU Emissions Trading Scheme (ETS) has been set up to encourage low-cost emission-reduction measures but does not yet properly provide the incentives required to bring about
structural change, argues Raimund Bleischwitz in this paper for the College of Europe. http://www.euractiv.com/en/climatechange/ets-needs-improved-sustainableimpact-eu-industry/article-167116
Insurance sector under EU antitrust scrutiny The European Commission's antitrust department, led by Neelie Kroes, is getting 'serious' about practices in the insurance sector, which it says may run counter to EU rules, especially regarding reinsurance, coinsurances and in-
surance brokerage by intermediaries. http://euractiv.com/en/financial-services/insurance-sector-eu-antitrustscrutiny/article-167091
EU urges developing countries to sign up to free trade deals As the deadline for ACP countries to conclude controversial Economic Partnership Agreements with the EU draws closer, the Commission and EU business interests called on anti-poverty activists to put an end to their "caricatural" criticism of
negotiations, which they insist are essential to eradicating poverty. http://euractiv.com/en/trade/eu-urgesdeveloping-countries-sign-free-tradedeals/article-167185
U.S. Chamber rEvents & Highlights The Eurasia Business Platform will hold its First Annual Conference on "Growth Imperatives and Regional Responsibilities" on December 3.
American Chambers of Commerce Events & Activities There are 43 American Chambers of Commerce (AmChams) in Europe and Eurasia, which are affiliated with the U.S. Chamber ofCommerce.
23
Kosovo Busniess Journal
AmCham
Fun Page
s s e n i s u Good B s e c i t c Pra t n e m e g a n a M d an Set a Good
ployee m E p e e K igh Morale H and genare treated fairly ho w s ee oy pl Em f" their ss likely to "rip of erously are far le ees betow your employ kn to t ge So . ss bo esions -opinions or sugg ter. Ask for their lve nsider them. Invo co y sl ou ri se d an e prein effective crim your employees ga tin . Consider star vention practices re ogram. Make su profit-sharing pr -- an e iv tit are compe your salary rates th ee may feel at underpaid employ u merely "makes stealing from yo " up the difference.
Personal Example
The boss who g n i se and office w o l l o f takes merchandi The paying ensupplies without s e c i t c ees to do courages employ business pra ement the same. g a n a m d o o g and many t n e v e r p p l e h will ems Separate of these probl
your Tighten tices c a r P g Hirin a deicants to fill out Require job appl -form. Then use it tailed application em er nces and form contact all refere ployers.
Functions
should never han|The bookkeeper rchases who makes the pu on rs pe he T . sh .Your dle ca who pays the bills on rs pe e th be t lity should no force accountabi en ld ou sh em st accounting sy es. Each checks and balanc of es ri se a h ug l the thro e as a check on al rv se ld ou sh n functio e an inwent before. Hav transactions that ny audit your dependent compa . books every year
24
Kosovo Busniess Journal
AmCham
Fun Page
lthough Abraham Maslow had discussed the highly complicated task of reaching a concrete definition of the basic human needs, it naturally follows that there are no easy assumptions concerning what employees really want from their organizations. In fact, the various types of their human needs will be eventually converted into specific ‘wants.’ Consequently, an in-depth look at typical employees wants and how organizations may satisfy them, will reveal some relatedness to Maslow’s ‘Pyramid of Needs’ as follows:
A
A Meaningful Job: A very difficult want to supply in today’s world of constant change and demands, particularly in large organizations with division of work culture. A meaningful job is the core to job satisfaction. It has got to do with the job content and how challenging it is.We are talking here about not only the employee’s skills and ability to do his/her job, but his talents to apply creative and innovative ways to do it. Individual’s need for both recognition and drive for self-actualization can be integrated in job enrichment to comply with individual wants. Therefore, the ability of the organization to maintain a good caliber of loyal employees who believe in the value of their jobs in the success of the organization is considered crucial in enhancing organizational competitiveness.
Fair Pay: could be considered the most important of all the basic needs as it should be secured in order for the individual to be able to satisfy any of his basic needs. In other words, a fair pay helps satisfying multiple physiological, security, and egoistic needs, even if it cannot alone motivate the whole person. The problem lies in how an organization ensures that their pay will be perceived by its employees as fair and competitive. From experience, I can safely say that pay is the most argued aspect of any organization. Job Security: A want which is high on the list due to the constant internal and external environmental threats such as the fast pace technological change, fierce competition, unstable economies, mergers, and downsizing. They all result in escalating sense of insecurity on the part of employees. In fact, unless any pay level is paired with job security employees will still feel insecure of losing their jobs any time and with them the pay they were getting. Organizational ruthlessness in this area poses the toughest challenge to business leaders to formulate plans and strategies that ensure a good market share and growth in order to be able to at least maintain their organizations existing employment levels.
Credit for Excelling: This want stems from the individuals egoistic needs and can be supplied by management through verbal praise of excellent work, monetary rewards for suggestions, as well as public recognition through awards or interviews in employees’ magazines, newsletters and bulletin boards. Recharging employees’ batteries is key to loyalty, increased productivity, and superior quality. It is a sure ticket to escalating net profit.
Opportunity to Advance: Not all employees want primarily to advance their careers. A strange discovery but true though. Some feel the social needs more strongly than the egoistic ones, but most employees certainly want to be assured that the opportunity is there. They are reluctant to take new responsibility and feel more comfortable with a stable job that requires a ‘good doer’. Such a feeling is influenced by a complicated cultural tradition mix of freedom and opportunity. As a general rule career advancement and development pose a great challenge to the organizations of today.
25
Kosovo Busniess Journal