IBNA Special Report
Tirana, January 9, 2015/Independent Balkan News Agency
A recent report of the Bank of Albania identifies a significant growth of the transfer of currency outside the country by foreign companies.
The report says that from January to September 2014, foreign companies that operate in Albania have transferred 138.3 million Euros abroad.
This figure amounts to 80 million Euros more than the same period last year.
In the period up to September 2013, 57,7 million Euro worth of capital have been transferred by foreign companies to the country of origin.
By comparing the same two periods year after year, the data of the Bank of Albania indicate a growth of around 140 % of transfers abroad.
According to the statistics of the Balance of Payments of the Bank of Albania, the biggest growth has been marked in the period from June to September of this year, where profits transferred abroad amounted to 64 million Euros, as opposed to 10 million Euros in the third quarter of 2013.
The other phenomenon that relates to the transfer of profits is the drop of investments from foreign companies in our country. In its recent report, the Bank of Albania says that foreign companies invested in the Albanian economy for the first nine months of 2014, 590,6 million Euros, or 117 million Euros less than the same period in 2013.
Experts and business explain the causes
Experts of economy and finance say that the increase of money transfers has several explanations. They relate to the global economic crisis, but also to the new tax policies in Albania, especially after the fact that in 2015, tax on dividend was increased by 50%.
Experts say that this trend of the transfer of profits by foreign companies outside Albania, will continue with the same pace.
Economy expert, Zef Preci, says that both of these causes are linked: “This happens for several reasons, which relate to the global crisis and mainly the European one, obliging companies to invest them in their country of origin. But this also comes as a result of the growth of tax on capital by the government”, says Mr. Preci.
The increased dividend tax is a problem for businesses
The 50% increase of tax on revenues and deposits caused much discontent during the discussion of the 2015 Tax Package and this massive transfer of capitals may be a reaction toward this measure.
The head of the Chamber of Commerce and Industry, Nikolin Jaka, says that the increase of dividend is wrong.
“It’s unacceptable to increase the tax on dividend from 10% to 15%. If we take into account corporation tax and tax on dividend, taxes amount to 30%. Thus, we exceed Macedonia, Kosovo, Montenegro and for the first time, we exceed Serbia too”, says Mr. Jaka.
The American Chamber of Commerce is also against this tax. Its representative, Genti Daci says that this increased tax has a direct impact on investments. “We strongly demand for the state not to touch the tax on dividend and the tax on source, as they have a direct impact on foreign investments”, says he.
Gjergj Xhika, head of the Chamber of Textiles, also objects to this tax measure. “We’re convinced that the tax increase on dividend affects the textile industry”, says he.
Declaration of transfers
This year, foreign companies must declare all transfers carried out during 2014. Foreign companies, including banks, must declare transactions over 50 million ALL (over 35 thousand Euros).
General Directorate of Taxes says that according to the law, all the firms that exert their activity in Albania and affiliates of foreign companies, must declare every transaction of over 50 million ALL a year, as an obligation stemming from the law on the transfer of price. This declaration for last year is made until March 31 and it’s accompanied by the financial statements and balance sheet”, says the General Directorate of Taxes.
A guideline of minister of Finance, Shkelqim Cani says that this declaration includes all transactions that can have an impact on the taxable profit of a taxpayer, including: transactions that include goods such as raw materials, transactions involving services, financial transactions and capital transactions that include the purchase or sale of shares or other investments.
Olindo Shehu, tax expert, says that the application of the law on the Transfer of Price will be a good shield to oversee the amounts of capital that leave the country.
“This will enable a greater economic stability and extra revenues in the state budget, without increasing tax and without weakening the performance of local companies”, says Mr. Shehu.
The transfer of money depreciates Lek
The fact is that the transfer of currency outside Albania has significantly increased. This is mainly done by companies and banks, which are affiliates of their mother banks in the EU, USA, etc.
Such phenomenon took place in 2007-2008. Experts warn that if profits that are transferred to mother companies and banks increases, then Lek may depreciate from the immediate increase of the need for currency in the market.
Currently, the currency market seems controlled. Lek continues to be exchanged with the Euro at the same rates as a few years ago, while Dollar has depreciated Lek by 18%. /ibna/