Some business organizations in Albania demand the flat tax to be introduced again

Some business organizations in Albania demand the flat tax to be introduced again

IBNA Special Report

Tirana, November 13, 2014/Independent Balkan News Agency

By Edison Kurani

In Albania, the government has warned a wave of fresh tax increases, accompanied by parallel measures which aim at reducing several other business taxes.

Among the taxes that are increased is the tax on profit which is made 15%.

The representatives of the main businesses in the country say that with this tax increase, the government is not even delivering its promise for the employment. According to them, this leads to a fall of competition with the Balkan countries, which have lower taxes and which in the recent years, have applied other cuts. Business organizations call on the government to review the tax package. They say that so far, their proposals have not been taken under consideration.

The government, on the other hand, says that the measures aim at reducing tax evasion in the country which is estimated to be around 40%. For the year to come, the government has declared war against tax evasion.

See More: Taxes in Albania change again, increases up to 15%

There must be better administration

The largest business organization in Albania, Konfindustria, believes that instead of increasing taxes in the country, there must be an economic and financial administration.

“The growth of budget incomes should have been based on efficient tax administration and economic development and not on the increase of taxes. Tax policies cannot turn into an objective in itself by meeting the short term objectives of the state budget and by risking the long term development of the national economy. I’m sorry to say that Albania doesn’t have a Ministry of Economy, because there’s a lack of economic assessment for the effects of the tax package on each sector and national economy in general”, says Gjergj Buxhuk, head of Konfindustria.

Buxhuku also addresses the requests of the organization that he represents: “Reintroduction of the flat tax at a maximum rate of 10% for all businesses that operate in open markets. A reintroduction of flat tax on all personal incomes”.

Buxhuku also says that construction permits must also be facilitated: “The full suspension of construction permits has taken the industry of construction materials, industry of construction and the employment of people in this sector into a collapse”.

Reduction of the tax burden must be a priority

Business Albania, another organization that represents businesses in the country, says that the tendency of each government must be the reduction of the tax burden and its efficient administration.

Its director, Luan Bregasi says that this should have been the best mentality for enterprise. According to him, the objective is not to increase taxes, but how to fight tax evasion.

Mr. Bregasi says that when tax on profit in Albania was at 10%, this was not a lot for the business, “but now that the tax is 15%, to pay even more, it’s a scheme that will perhaps increase evasion in the construction sector and will oblige businesses to operate with two financial statements”.

All the Balkan countries are applying facilitating policies for tourism, as they think that it’s the most important industry in the country.

Based on this, Business Albania requests several stimulating policies in the domain of tourism.

“We ask for VAT to go down from 20% to 8% or 10%, because in the countries of the region, VAT is smaller, 2-3 times smaller.”

Bregasi illustrates this with the example of a neighboring country: “VAT in Greece is 6.5% now and when Greece applied this policy in 2011, it increased incomes in the domain of tourism”.

Is tourism turning into a main industry in the country?

That tourism must be the main industry in the country, this is admitted by everyone. But are there serious efforts to make tourism as lucrative as possible?

Facts suggest the opposite. Albanians do not find many favorable conditions in the tourism that the country offers and are more and more choosing the beaches of Turkey, Greece, Spain and also neighboring Montenegro to spend the summer holidays. They also choose to spend the winter holidays and the short weekends in these countries.

Bank of Albania says that Albanians in 2014 spent 54 million Euros more abroad as opposed to 2013.

Zak Topuzi from the Albanian Tourism Association, says that if the policies that Balkan countries have applied, are applied by Albania, then Albania would generate 1 to 2 billion Euros more from tourism.

“The funds that Albanians are spending abroad are increasing, because they cannot find standards and possibilities to spend nice holidays in Albania”, says Mr. Tuzi.

“It’s not the right time to increase taxes”

Certified accountant, Agim Binaj says that it’s not the right time to increase taxes. He stops on the increase from 10 to 15% of the tax on the interest of money deposited in the banks of Albania. “There’s no country in the world to tax someone 15% for the deposit that he has in the bank. In other countries such as Bulgaria and other Balkan countries, this rate is 10%. These countries are part of the EU too”.

The tax increase also applies for the dividend. Binaj says that he’s against the increase of the dividend, because according to him, this would prevent investments in the domain of capitals. “We’re in favor of the growth of capitals. We have foreign companies that operate in Albania and which have invested 20 million Euros. But, how can dividends be taxed 15%, at a time when the countries of the region apply a tax of 10% or 12% at most?”, says Binaj.

Textile businesses: Some of the promises were not delivered

Gjergj Gjika, head of the Chamber of Commerce of the Textile Businesses, says that the government didn’t deliver the promise for the refund of VAT and the amnesty on late payment charges.

He says that the increase of the dividend by 15% is an unacceptable blow to businesses.

The increase of the dividend is unacceptable for the Chamber of Commerce and Industry of Tirana too. According to it, with such incentive, the government is offering to foreign investors the highest taxes in the region.

The head of the Chamber of Commerce, Nikolin Jaka says that the new tax package doesn’t contribute for a sustainable economy and economic growth.

According to him, Ministry of Finance must first draft a strategy, while as it was the case a year ago, this year too there was no dialogue with stakeholders. “We have raised our voice about what enterprise is demanding. The government is operating with methods applied a year ago. It’s surprising to see how fast ministers and government people are infected, by proposing laws or fiscal systems which have not been consulted appropriately, without hearing the opinion of private enterprise, but by injecting them as the best way or the best recipe for the enterprise”, says Mr. Jaka.

According to him, enterprise must be heard, especially when it comes to tax increases.

“We have proposed many ideas, many proposals which have been explained and one of them was what we said about the law on VAT. We have demanded and continue to demand not to change the fiscal system, because we may have an increase of incomes, meaning that dividend in the case of corporations may change. We just learned about a change on the excise on tobacco and bio fuels. You must not forget that national enterprise plays a very important role in the economy of a country, especially in Albania, which is characterized by a large migration of people, who may return in the country and inject their finances in the economy”, says Mr. Jaka.

The organization that he chairs demands from the government to exempt new businesses from the tax on profit. “We demand economic parks, free economic zones in order to focus on economic performance, based on innovation and technology and not by advertising jobs in an industry which enslaves more than it benefits the Albanian economy”, says Mr. Jaka.

The opposition criticizes the government plan

The opposition criticizes the government plan for changes in the tax package. Opposition leader, Lulzim Basha says that the opposition doesn’t aim at gaining political capital through this criticism. “The opposition could have chosen to sit back and look at the crisis that the government is causing, but it has chosen to be engaged in order to stop the worst scenario for the economy of the country”, says Mr. Basha.

In order to do as many efforts as possible for the new tax package not to be approved, the democrat leader, Lulzim Basha has called on businesses to “engage their potential in order to stop the tax package which will bring collapse in the economy and bankruptcy for businesses”.

Basha says that the first tax increase that the government did a year ago, brought recession. According to him, a further increase would deepen it and put the economy into paralysis.

The government is optimistic

See More: Albanian government submits the 2015 budget to parliament

Minister of Finance, Shkelqim Cani, says that the 2015 budget is based on four principles: support for a sustainable economic growth and employment, reduction of growth risks, bearing in mind the reduction of the public debt level and measures for the energy sector; budget to support structural reforms, such as: Reform in pensions, social protection, energy; and an improvement of public services.

After a dropping trend of economic growth, the government is expecting 2015 to offer a positive turn, with 3% growth as opposed to 2.1% expected for 2014.

See More: Standard & Poor’s changes its rating on the Albanian economy

“We have been engaged and have agreed to reduce public debt from 71% of GDP, which is the current level, to 65% in 2017. The reduction of debt facilitates the state budget, as we reduce the expenses on interest rates and at the same time, we reduce the risks for the economy”, says minister Cani. /ibna/

See More: Albania goes up 40 places in the doing business ranking

See More: Temporary economic slowdown, says Bank of Albania