Financial situation in Albania, according to the government, opposition and IMF

Financial situation in Albania, according to the government, opposition and IMF

Tirana,  4 August 2015/Independent Balkan News Agency

By Edison Kurani

In Albania, the government is talking about a recovery of the economy and economic growth around 2,82%. The opposition says that the situation is quite the opposite and demands urgent financial measures.

The government agrees with this, as the Prime Minister has warned a large scale operation by state institutions against informal economy. On the other hand, International Monetary Fund launches criticism about the performance of Albanian institutions.

Amid this situation that has been lasting for days, the figures published by the ministry of Finances in the recent hours, suggest a drop in incomes, especially from taxes and customs.

Fiscal indicators for the first six months of the year indicate a 8,6 billion ALL or 68 million USD drop from the projected figure. Meanwhile, the “hole” created by taxation and customs is estimated to be around 13,4 billion ALL or 105 million USD.

Based on the data published today by the ministry of Finance, in total revenues in the state budget for the first six months of the year, are 4,5% less than the government’s projections or 8.6 billion all (68 million USD).

Compared to the first five months, there is a further drop in incomes.

At the end of May, state budget was missing 52 million USD. In June, this “hole” became even deeper with another 16 million USD.

Problems continue to relate to tax revenues and customs revenues, with 10% or 105,5 million USD less than planning.

Compared to the first 5 months of the year, the “hole” caused by tax and customs revenues is over 18,5 million USD.

There  has been a general fall for all taxes, except for tax on profit, which is 9,5% higher than planning, or 9,2 million USD more.

Government: We have economic growth and drop in revenues

Although it talks about an economic growth of 2,82% in 2015, PM Edi Rama says that there’s a drop in revenues. “On one side, we have a 2,82% economic growth and on the other we have a drop of revenues, which reflects the change in the structure of the economy with significant growth of Domestic Product”.

Rama IBNA (1)

Rama says that the drop of the import of oil as a result of the high growth of production in the country and its processing in the country, has played its role.

The Prime Minister says that the causes of the drop are being analyzed and based on this analysis, adequate measures will be taken.

“We will have the final picture at the end of this analysis, which will determine our approach, in relation to the revenue projections for the rest of the year”, Rama said.

IMF reactions

The fall of revenues was the cause that the last mission of the International Monetary Fund didn’t approve the revision of the three year program with Albania, which is followed by the non allocation of the installment.

The residential representative of IMF in Tirana, Jens Reinke, has expressed his concern about the “significant drop” of revenues, saying that this drop has mainly come as a result of problems in tax administration.

Reinke IBNA

IMF has demanded the government to take these measures. IMF is concerned that the causes for the drop are long term and this can risk the program for the reduction of the debt.

“Some of the reasons reflect external factors such as the drop of the price of oil, low interest rates or low inflation. But some others relate to the application of the law and tax regulation. Thus, there’s a problem of administration. Taxes in Albania are not that low, but performance of revenues is not that strong”, Mr. Reinke says.

As a result of this situation, talks between the IMF and the government have been suspended. But in October, the IMF mission will return to Tirana. The assistance program of IMF is strongly related to the performance of the collection of revenues.

This is also confirmed by Mr. Reinke, who says that the Albanian government will find itself in front of two alternatives, to reduce expenses or increase taxes: “Our program is anchored in the tax performance and reduction of debt. If some indicators do not perform according to plans, then there must be correcting measures. The government must look into savings and cut unnecessary expenses. But if they are not adequate, then extra measures are needed in terms of taxation. But it’s up to the government to decide which one of these instruments it will choose, if it will cut expenses or increase taxes”.

Opposition: When a government fails in the tax collection, its main role ceases to function

The vice chairman of the Democratic Party,  the largest opposition force, Edmond Spaho says that “the Ministry of Finance has officially admitted the government’s failure in the collection of revenues”.

Spaho IBNA

“Failure in the collection of revenues, in taxes and customs, is the main failure of this government. When a government cannot collect revenues, its main role ceases to function”, Spaho says, commenting the economic situation and official figures.

“The official admission of this failure by the Ministry of Finance has revealed Edi Rama’s lies, who a few days ago spoke of successes. The worst thing about the country is that these 134 million USD which are missing in the budget, missing in investments, roads, schools or water supply systems, originate from corruption. They are 134 million USD which have ended up in the pockets of officials, ministers and clients of Edi Rama”, Mr. Spaho accuses.

The notable expert of economy says that the problematic situation in the economy led to the IMF to decide not to allocate the loan that it had planned to issue for the Albanian government.

But is there an alternative solution to improve tax performance? Mr. Spaho says that the solution is there and simple: “The only solution is to cut taxes, to have an honest administration of taxation and customs and treat everyone equally in front of the law”.

Officially, the Democratic Party declared today that if it comes back in power, it will introduce a 9% flat tax, the lowest one in the Balkan region. /ibna/