Difficult test for “Rama” government, SMI says NO to progressive tax on the industry of textiles

Difficult test for “Rama” government, SMI says NO to progressive tax on the industry of textiles

“Rama” government is put in front of a difficult test this weekend, as parliament must vote the 2014 state budget and the new tax package. In the voting in principle, majority with 86 MPs, only managed to get 79 votes in favor in the parliament with 140 seats, as a part of socialist MPs stayed away from the process. Voting article by article faces two difficulties: Three amendments of SMI and 30 of the opposition

Tirana, December 27, 2013/Balkan Independent News Agency

Through a surprising decision, Socialist Movement for Integration announced on Thursday an official demand for the industry of textiles not to be subject to  the progressive tax.

Chairman of the parliamentary group of Socialist Movement for Integration, Mr. Petrit Vasili explains the reasons of this demand: “As far as the industry of textiles is concerned, we propose for tax on profit to remain at 10% for several basic reasons. This business has been an engine of employment for the Albanian society and has faced an important weight of employment, also being an important social support for thousands of Albanian employees, who are being employed by these businesses and who come from poor classes of the population”, says Mr. Vasili.

With the new proposed scheme by the government, tax on profit for textile companies increases from 10 to 15%. Experts say that this tax increase by 50% seriously risks to damage the financial situation of this industry, which is one of the biggest employers in the country.

SMI assesses that through the flat tax of 10%, for the specifics that the textile industry bears, Albania continues to be an attractive country for foreign businesses, which would this way prefer to do business in Albania over neighboring countries in the Balkan.

In this aspect, SMI is determined not to negotiate changes in its plans: “We have also submitted this request to the parliamentary committee of economy and finance, demanding their understanding and evantually their approval and discussion article by article in the plenary session which is held on Saturday”, says Mr. Vasili.

Businessmen speak: If taxes increase, we will make job cuts

Flamur Hoxha is chairman of the Chamber of Representatives of Clothing Industry. Mr. Hoxha says that this sector occupies an important place in the Albanian economy employing over 30 thousand people. The textile industry also plays a crucial role in the increase of exports in Albania and recognition of Albanian products in the world.

Mr. Hoxha sees the situation as gloomy. He says that in the European market, offer is significantly falling and stresses that geographical positioning is the only advantage of Albania. “We may even have lost this advantage, because now we may be considered as a transit country, as from the Port of Durres, Montenegro, kosovo, Serbia, FYR Macedonia and Bulgaria are only a couple of hours away.”

Hoxha says that 10% tax on profit which is applied now, brings 3-4 million Euros worth of incomes and considers this a modest figure. “If we were treated as a sector free of taxes, then there would be a growing interest to invest in Albania by increasing the number of employed people several times”.

Mr. Hoxha warns that “with this tax increase, each of us will want to cut expenses as much as possible, cut the number of employees, because it’s impossible to afford this large cost from the start of the year”.

A good source of employement and votes

SMI sees the textile indsutry as a very good source of employment even in the most difficult moments for the Albanian economy. Mr. Vasili says: Other businesses don’t have the employment capacities that the textile industry offers. This way, we have an answer of an economic and a social level, a business which is development and more job opportunities which are encouraged and developed in the future”.

In the electoral campaign, the strongest promise of SMI was the creation of as many jobs as possible. Given that unemployment is a big social problem in Albania, SMI gained a lot of votes in the 2011 elections, by doubling them as opposed to 2009 general elections and its results were almost 5 folded in the June of this year elections.

Therefore people believe that the concession offered by SMI for the textile industry, besides the official arguments offered by it, closely relate with its attempts to preserve the electoral level of the last elections. After more than a year and a half, SMI and other parties will face with local elections which are seen as an important test of the functioning of the new majority and the assessment of the electorate for it.

Textile industry thanks leader of SMI

Textile industry counts over 500 medium sized and small enterprises with around 100 thousand employed people, from the most vulnerable classes of society. The truth is that wages in these businesses are very small, but some people believe that employment of people reduces social problems.

Textile industry feared progressive tax. SMI’s decision not to accept this tax was seen as good news and a promise held by leader of SMI.

Gjergji Gjika, chairman of the Chamber of Industry of Textiles of Albania says: “We want to express our recognition for this political act of the parliamentary group of SMI, which follows promises kept by SMI and its chairman, mr. Ilir Meta. This political act of SMI is strongly supported by the textile industry and is praised by our Chamber of Textile Industry, as a real legal incentive and in support of the most affected business by European crisis and the most competitive one in our region”.

This business is seen as the business with the highest risk of competition, especially in current days when alternatives of tax heavens have reached Balkan countries.

Mr. Gjika says: “Albanian textile companies remain strongly competitive in the Balkan market, as our main competitor in Europe”.

Is SMI causing a political deadlock for the majority?

In the June 23 elections, Socialist Part gained 65 seats out of 140 seats that parliament has. Opposition gained 57 seats while SMI gained 16 seats. Several small parties gained the rest of the mandates. This way, SMI was confirmed as the third political force.

But like in 2009 when it joined DP, even in 2013, SMI was neccesary for the political party of Edi Rama. If SP didn’t have the votes of SMI, with its 65 seats and 2 others of the coalition, it wouldn’t have the necessary minimum of 71 seats. SMI was further strengthened, because two of its MPs were part of the 65 seats of the SP and two others were taken by the opposition, by taking the number of its seats to 20.

Working out these figures, it’s relatively easy to respond to the question: Can Rama refuse Meta’s request?

But how did yesterday’s decision of SMI for the textile industry come?

In the recent days, parliament is discussing the new tax package. The Socialist Party was clear against the demand of the textile industry not to make it subject of the progressive tax.

Ervin Mete, deputy minister of finance said that “we are against these exempts”.

The government has not even accepted the proposal of the chairman of the economy committee, Erjon Brace, saying that this would have big financial effects on the budget.

Mr. Brace demanded for the tax for the textile industry to be zero, with the condition for the investment to take place within the Albanian territory.

This idea was also rejected by the ministry of finance.

Dashamir Shehi, lawmaker of the National Development Movement Party, ally party of the former prime minister Berisha has proposed another scheme, for the tax on profit on the textile industry to be reduced to 7,5%, the same as the tax on small business.

DP, 30 amendments: We propose Rama’s promises

Democratic Party will submit 30 amendments in Saturday’s plenary session, where the budget and tax package will be discussed article by article. A part of the amendments are electoral promises of the SP made in the last campaign, while several others aim to bring back taxes in the current level. DP demands from the government to keep its promise for free health. The opposition also proposes for amnesty to be granted for all penalities imposed on taxpayers for the period January 1-September 15 2013, a time during which electoral penalties were imposed, according to SP. It was the SP that promised during the electoral campaign that these fines would be cancelled if it came into power.

Another amendment of DP consists on the promise of SP for the full lifting of 20% VAT on power supply. This promise was partially included in the government program, which pledges to reduce and compensate VAT on poor families. The budget and new tax package doesn’t even include Rama’s electoral promise for the lifting of VAT on power supply bills for all households or partial lifting. /ibna/