‘End of madness’ crackdown fails to increase gambling tax collection

‘End of madness’ crackdown fails to increase gambling tax collection

TIRANA, May 24 – Gambling businesses are paying less in taxes and a late 2013 nationwide campaign to curb widespread informality in the sector seems to have now been forgotten although having a positive effect for 2014. Gambling companies ranging

Read Full Article
‘Shady’ incinerators raise environmental, increased waste management cost concerns

‘Shady’ incinerators raise environmental, increased waste management cost concerns

TIRANA, May 24 – The controversial waste-to-energy incinerators that Albania is building under public private partnerships risk the livelihoods of local farmers, increase waste management costs and run counter to EU principles that promote recycling, says the Voice of America

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Concern mounts as euro hits new 10-year low against Albanian lek

Concern mounts as euro hits new 10-year low against Albanian lek

TIRANA, May 23 – Concern among the country’s exporters mounted this week as the euro hit a new 10-year low against Albania’s national currency, considerably reducing profits for about two-thirds of the country’s Eurozone destined exports. Europe’s single currency hit

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IMF warns of PPP, unpaid bill risks to Albania’s public finances

IMF warns of PPP, unpaid bill risks to Albania’s public finances

TIRANA, May 22 – The International Monetary Fund has warned public private partnerships and the accumulation of new arrears pose two of the key threats to Albania’s public finances. In a new country report published this week, the Washington-based financial

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Albania’s natural population growth turns negative for the first time in almost a century

Albania’s natural population growth turns negative for the first time in almost a century

TIRANA, May 22 – Albania’s natural population growth registered negative growth in the first quarter of this year as the number of deaths slightly exceeded births in a dramatic but warned situation that takes place for the first time in

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Value-based property tax postponed for next January

Value-based property tax postponed for next January

TIRANA, May 21 – The Albanian government has postponed the implementation of a newly adopted value-based property tax for next year, giving local government units another 10 months to prepare for its collection. The value based property tax was supposed

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Non-tariff barriers hamper Western Balkan intra-regional trade, report shows

Non-tariff barriers hamper Western Balkan intra-regional trade, report shows

TIRANA, May 21 – A decade after joining the CEFTA regional trade agreement, non-tariff barriers continue to hamper trade exchanges among EU aspirant Western Balkan countries where intra-regional trade has failed to expand and continues to be concentrated on goods

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Albania’s oil production hits 6-year low as prices slowly recover from mid-2014 slump

Albania’s oil production hits 6-year low as prices slowly recover from mid-2014 slump

TIRANA, May 21 – Albania’s domestic oil production hit a 6-year low in 2017 despite international oil prices considerably recovering following the mid-2014 slump, but yet remaining at about half of their peak 2011-13 levels in a situation that has

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Exports’ growth slows down following ongoing national currency’s strengthening

Exports’ growth slows down following ongoing national currency’s strengthening

TIRANA, May 17 – With two-thirds of Albania’s exports destined for Eurozone countries, the country’s exporters are suffering their first blow from the considerable strengthening of Albania’s national currency against Europe’s single currency during the first five months of this

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Ruling Socialists offer tax incentives ahead of upcoming 2019 local elections

Ruling Socialists offer tax incentives ahead of upcoming 2019 local elections

TIRANA, May 16 – The Albanian government has unveiled a package of tax incentives for 2019 when Albania will be holding its upcoming local elections and the ruling Socialists eye to preserve the ruling of the country’s big local government

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                    [post_content] => TIRANA, May 24 - Gambling businesses are paying less in taxes and a late 2013 nationwide campaign to curb widespread informality in the sector seems to have now been forgotten although having a positive effect for 2014.

Gambling companies ranging from electronic casinos to thousands of sports betting shops paid about 4.52 billion lek (€35.5 mln) in taxes in 2016, down 16 percent or €6.5 mln compared to 2014 when the government collected a record 5.35 billion lek (€42 million) triggered by a nationwide late 2013 campaign dubbed "The end of madness," Top Channel TV reports citing data obtained by the tax administration.

The lower collection rate is also related to huge debts gambling businesses owe to the tax administration.

Despite booming income and high profit rates, two sports betting companies and Albania's sole casino were among the top debtor companies owing the tax administration a total of 1.5 billion lek (about €12 mln) at the end of 2016, according to data by the Supreme State Audit.

Albanians are reported to have spent about 15.2 billion lek (€120 mln) in electronic casinos and booming sports betting shops in 2016, up 15 percent compared to 2015, according to data obtained by Monitor magazine. The amount is equal to about 1 percent of the country’s GDP and is considered too high for Albania where similarly to other regional countries, GDP per capita and consumption rates are at only about a third of the EU average.

In a report on inspections carried out in the first half of 2017, the Supreme State Audit said it identified about 50 billion lek (€375 million) in income that state authorities failed to collect from 2014 to 2016. The revenue miss is related to the Gambling Supervisory Authority’s failure to impose and collect fines following seizure of games of chance equipment, often operated informally or not meeting technical requirements.

In late 2016, the ruling Socialist Party-majority approved a two-year extension to a law disciplining gambling in downtown areas, citing concerns over gambling businesses not being ready to move to tourist attractions, the possible spread of illegal gambling and the state budget losing millions of euros in taxes, in a move which came following apparent successful lobbying by the lucrative gambling industry. The law, initially scheduled to come into force in January 2017, will now be implemented starting 2019 unless a new extension takes place.

Albanian authorities have selected an Austrian-Polish-Albanian concessionaire to set up, operate and maintain an online central monitoring system on Albania’s gambling industry for the next 30 years.

The government says the concession is aimed at preventing tax evasion and money laundering in the industry which employs about 1,800 people and generates an annual $125 million in turnover.
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                    [post_content] => TIRANA, May 24 – The controversial waste-to-energy incinerators that Albania is building under public private partnerships risk the livelihoods of local farmers, increase waste management costs and run counter to EU principles that promote recycling, says the Voice of America in the local Albanian service in an in-depth article examining Albania’s waste incineration projects.

A farmer in the village of Verri in the southwestern region of Fier, where a waste-to-energy incinerator is being built only about 1 km from his tomato and melon farm, says the incinerator will destroy his greenhouse investment producing about 100 metric tons a year and force him back to migration.

“I don't want to leave, but under the circumstances of lack of information, violence used and failure to have justice delivered in this country I am forced to," Leonard Janji, a 38-year-old farmer is quoted as saying.

Local village residents have been staging protests for more than a year against the incinerator's construction, uncertain about the impact it will have on their livelihoods and claim the public hearings that the concessionaire held were a farce.

The Fier incinerator project was displaced in Verri following strong opposition and protests by residents in Mbrostar and Plyk villages.

The Fier waste-to-energy plant is a 3.66 billion lek (€28.8 mln) investment that will be built and operated under a 6-year PPP with a capacity of 200 metric tons of waste a day that is also expected to produce electricity from the burning of waste through an incinerator.

The plant will be operated by Integrated Technology Waste Treatment Fier, an Albanian joint venture which was the sole bidder in a tender held in 2016.

Albania introduced waste-to-energy plants in late 2014 when the government made a U-turn from its EU-aligned national strategy that considers disposal and incineration the least preferred waste management options.

The country has already built its first waste-to-energy plant in Elbasan, central Albania and has signed concession contracts backed by the central government to build two new such plants in Tirana and Fier, despite environmental concerns by local residents and environmentalists worried over the new plants and their incinerators increasing dangerous pollution in the country.

The Elbasan waste-to-energy plant, already operational since April 2017, was also built under a 7-year concession contract with an Italian company.

The Albanian government has also concluded contract negotiations with a Netherlands-based company that has been awarded a 30-year concession to build a waste-to-energy plant in Tirana in return for investment of €128 million.

The Tirana Municipality will be forced to guarantee payment for a minimum amount of 550 metric tons of waste a day, taking annual Tirana taxpayer support to the project to €5.8 million and a total of Euro 174 million at the end of the 30-year contract.

Documents obtained by VoA show the winners of those concessions include a network of small companies in partnership with each other as well as offshore tax haven companies with unknown shareholders.

Albania's main opposition Democratic Party has accused Klodian Zoto, an Albanian businessman with stakes in the Elbasan and Fier incinerators, as linked to the government, claims which government has dismissed.

Prime Minister Edi Rama has described such waste-to-energy plants as a perfect solution to the long-standing issue of waste management in the country.

 

Environmental, high cost concerns

In addition to question marks over their ownership, the incinerator projects have also raised concerns over the sharp increase in costs on waste treatment in Albania as well as their environmental impact.

Environmentalists and economists say the incinerators will produce too much pollution for Albania and cost taxpayers dearly.

"An incinerator burning 1 million metric ton of waste for 30 years means huge pollution for a small country such as Albania," environmentalist Lavdosh Feruni is quoted as saying.

“This U-turn is in the best base naive decision-making and in the worst case massive corruption," he adds.

Economy expert Zef Preçi is also worried over increased costs and the unsolicited proposals Albania applies offering concessionaires bonuses ahead of the tenders.

"There's deviation from the landfill approach and an increase in costs by four to five times through the waste processing and burning. There is a strange selection through the method of unsolicited proposals which in reality secures larger profits for companies," says Preçi, the head of the Albanian Center for Economic Research.

The European Commission, which last April recommended the opening of accession negotiations with Albania pending a green light next June by the European Council, has also been critical of Albania's waste incineration projects.

"Economic instruments to promote recycling and prevent waste generation remain limited. The construction of an incinerator in Elbasan which started to operate last year and plans for further investment in incinerators pose concerns in terms of compliance with EU principles since disposal and incineration are the least preferred waste management options," says the European Commission.

The VoA says taxpayer support to the Elbasan and Fier incinerators has already amounted to €21.8 million and is expected to further increase with the more costly Tirana waste-to-energy plant.

Earlier this year, business associations warned the waste recycling industry in the country is on the brink of bankruptcy claiming state inspectors revoked licences to local companies operating in Tirana to pave the way for the upcoming waste-to-energy plant that will use incinerators to burn waste and produce electricity.

Waste management has been a chronic issue in Albania in the past two decades, with widespread burning and dumping having negative effects on human health, the environment and the rapidly growing tourism industry.

Three quarters of Albania’s municipal waste is landfilled, about 17 percent is recycled, 3 percent is incinerated and 1.2 percent is still dumped, according to 2016 data by state statistical institute, INSTAT.
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                    [post_content] => TIRANA, May 23 – Concern among the country’s exporters mounted this week as the euro hit a new 10-year low against Albania’s national currency, considerably reducing profits for about two-thirds of the country’s Eurozone destined exports.

Europe's single currency hit a new 10-year low of 126.74 lek this week, after trading at an average of 127.3 lek in the previous week, but has depreciated by about 5 percent compared to the mid-January peak level of about 134 lek for this year and is about 9 percent lower compared to mid-2015 when the euro’s five-year reign of about 140 lek came to an end.

The garment and footwear industry producing the country’s top exports is the hardest hit industry due to the low value-added exports it produces as the raw material is overwhelming imported from Eurozone countries, mainly Italy, and labour costs and taxes are incurred in the national currency, lek.

Medicinal and aromatic plant exporters also complain the strengthening of Albania’s national currency against the U.S. dollar and the euro is putting the industry that employs around 90,000 people in serious difficulty.

Most of the country’s medicinal plants are exported to the U.S. but exporters complain their profits have significantly dropped following a sharp depreciation of the U.S. dollar against Albania's national currency, lek, since early 2017.

The U.S. dollar, whose weight on the Albanian economy is much lower compared to the euro, slightly gained some ground this week as it traded at 108.07 lek, but yet stood at a three-and-a-half year low and was down by 16.5 percent compared to the early 2017 level of about 129 lek, according to Albania’s central bank.

Exports of medicinal and aromatic plant exports hit a 5-year low of 12,888 metric tons, worth about 3.5 billion lek (€26.6 mln) in 2017, with experts blaming the situation on the cultivation of imported sage instead of indigenous varieties, leading to lower demand.

Local farmers and pickers sell 1 kg of unprocessed sage at less than $4 at a time when 20 grams of Albanian sage at U.S. supermarket chains is sold for $5.2.

The Albanian sage meets 70 percent of American market needs.

Medicinal plant exporters warn a weaker U.S. dollar and euro will lead to a cut in jobs and domestic investment to process and export products.

Speaking at conference this week, Filip Gjoka, the head of the Medicinal and Aromatic Plant Producers, said the government should consider tax incentives if the country’s central bank cannot intervene to strengthen lek.

Both the government and the central bank have ruled out the possibility of any market intervention, saying the country’s free floating exchange rate regime is determined by market demand and supply and that the national currency’s strengthening is a result of the Albanian economy recovering, and higher inflows of euros from foreign direct investment, tourism and remittances.

The country’s central bank says the de-euroisation package it has adopted to stimulate savings and borrowing in the national currency, has not yielded any effect so far as measures gradually enter into force starting next June, but does not rule out any psychological effect.

However, the opposition and some experts doubt the main reason behind this situation is euro inflows from cannabis cultivation and drug trafficking that are allegedly being laundered in construction projects.

Economy expert Suzana Guxholli, an opposition Democratic Party official, links the phenomenon to illegal euro inflows resulting from the peak 2016 cannabis cultivation and ongoing drug trafficking in the country, considered a major cannabis producer and a key transit route for cocaine and heroin for European markets.

Albanian exporters estimate the country’s economy will be stripped of at least 14 billion lek (€108 mln) in losses from exports, tourism and remittances for 2018 if Europe’s single currency continues to trade at this 9-year-low rate against the Albanian lek.

Local producers are also at risk because of tougher competition from cheaper imports at a time when the country's exports cover only about half of total imports.

As a rule, Albania’s central bank can intervene either indirectly through orienting statements or engage in direct currency exchange market operations.

The central bank has up to now called on stakeholders not to make hurried currency conversions pushed by exchange rate fluctuations because of possible huge future losses, but said it cannot intervene as long as the national currency's strengthening is a result of an increase in foreign currency supply and lower risk premia in the internal financial market.

On the positive side, the depreciation of the euro against the national currency is good news for borrowers in Europe’s single currency who have their income in lek, the government’s external debt payments as well as imports whose cost has slightly dropped.

The depreciation of the national currency has not been yet reflected on the performance of the country's exports which grew by an annual 17 percent in the first four months of this year, fuelled by ‘construction material and metals” as well as recovering crude oil exports and the resumption of electricity exports.

However, “Garment and footwear” products, accounting for 40 percent of Albania’s poorly diversified exports, grew by a mere 5 percent year-on-year in April 2018 following double-digit growth rates in the previous three months as the euro lost about 5 percent of its value.

Half of Albanians’ savings and lending is in Europe’s single currency, making Albania one of the region’s most euroised economies, in a situation that holds back the pass-through of Albania’s central bank easier monetary policy to promote lending and causes losses of about 9 billion lek (€67 million) annually in seigniorage and foreign currency reserves for the Bank of Albania.

Albanians’ massive savings in euros have also been hit, but the central bank says there have been no panic withdrawals or conversions.

Albania’s total euro-denominated deposits at the end of 2016 were estimated at about 2 billion euros, accounting for 40 percent of total savings, according to the European Central Bank.
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                    [post_content] => TIRANA, May 22 – The International Monetary Fund has warned public private partnerships and the accumulation of new arrears pose two of the key threats to Albania’s public finances.

In a new country report published this week, the Washington-based financial institution says the government’s controversial €1 billion PPP program and newly accumulated central and local government unpaid bills of about 1.7 percent of the GDP pose key threats to the government’s public debt reduction agenda over the next four years.

“The current PPP framework is poorly designed and lacks proper recording and risk analysis of investment projects,” says the IMF report about the government's ambitious program over the next four years comprising nine new PPP projects with an estimated investment cost of €1 billion, about 7 percent of the country's GDP.

“To effectively manage fiscal costs and risks arising from PPPs, the Albanian ministry of finance should undertake a full-scale assessment of PPP-associated risks, their impact on the medium-term budget framework and debt sustainability,” adds the IMF.

While the PPP projects are expected to be completed in four years, the government intends to repay concessionaires over 12 years in annual instalments and road concessionaires are also expected to collect tolls to meet investment costs.

According to the IMF, PPPs entail construction, financial, demand, political, force majeure and renegotiation risks and the Albanian government's legislative threshold of annual payments to concessionaires not exceeding 5 percent of the previous year fiscal revenues is not reliable, reflecting a mix of mandatory and expected payments and worst-case estimates if pre-determined minimum revenue guarantees are triggered.

Albania has been actively using PPPs to facilitate public investment in the past decade with more than 200 PPP contracts signed by mid-2017 with an estimated total investment of 505 billion lek (€3.7 billion), about 36 percent of the GDP.

In its 2018 budget report, the Albanian government expects taxpayer support to eight existing PPP contracts and three new concessions that become effective in 2018 to increase to 9.4 billion lek (€69.2 mln), yet at almost half of the 5 percent of tax income threshold.

The Arbri Road linking Albania to Macedonia as well as several internal highways, some 150 schools, hospitals and healthcare facilities are on the PPP agenda. PPP contracts also involve three controversial waste-to-energy plants which the European Commission has recently warned pose concerns in terms of compliance with EU principles since disposal and incineration are the least preferred waste management options.

The IMF also says the current practice of unsolicited proposals awarding bidders a 10 percent bonus ahead of tenders should be eliminated, but government authorities say they will not discontinue the practice before 2021 when the country holds its next general elections.

The International Monetary Fund has earlier warned the Albanian government’s ambitious Euro 1 billion public private partnership project will not only fail to bring public debt down to 60 percent by 2021, but could create hidden costs which if included in the debt stock could take it to 71 percent of the GDP.

The Washington-based lender of last resort predicts Albania’s public debt will not drop to 60 percent of the GDP before 2023 and remain the highest among regional EU aspirant Western Balkan economies.

The IMF says its baseline scenario expecting public debt to drop to 64 percent of the GDP by 2021, includes central and local government arrears but does not incorporate $57 million the Albanian government will have to pay to Bankers Petroleum, the country's largest oil producer, after losing an arbitration case over a tax dispute as the payment mechanism is still to be agreed between the two parties.

“Despite the favorable environment and positive short-term outlook, risks and vulnerabilities remain, emanating from high public debt, non-performing loans in the financial sector, and weaknesses in public institutions and the judicial system,” says the IMF.

The IMF also recommends Albanian authorities should consider tax hikes and refrain from lowering tax rates or granting any new tax exemptions or preferential tax treatments that could complicate the tax system and distort the resource allocation in the economy.

The warning comes as the government has lowered the VAT turnover threshold negatively affecting small businesses, something which the IMF has criticized as non-efficient, and at a time when the government has unveiled plans to offer tax incentives for 2019 ahead of next year’s general elections.

 

New arrears

The IMF estimates Albania's central and local government institutions accumulated arrears worth 26.6 billion lek (€209 mln) equal to 1.7 percent of the country's GDP at the end of 2017.

If included in the public debt stock, the accumulated unpaid bills take Albania's public debt to 71.8 percent of the GDP for 2017, up from a 4-year low of 70 percent of the GDP that the Albanian government reports.

Central government units owe the majority 17.4 billion lek (€ 136.5 mln) in arrears, of which VAT refund arrears mainly belonging to three major taxpayers account for 0.7 percent of GDP.

“Institutional improvements are needed to tackle arrears, including in VAT refunds and unbudgeted investment projects. As arrears represent unrecorded fiscal deficits, it is important to strengthen the registration of budget commitments and record unpaid bills,” says the IMF.

Albanian authorities say they are developing a payment schedule for the large taxpayers with an aim to repay all outstanding arrears by September 2019.

The accumulation of new arrears comes after some €500 million was cleared in 2015 in payments to private sector companies that had been contracted for public works and services under a two-year deal that is estimated to have strengthened private sector balance sheets, reduced nonperforming loans and supported domestic demand, although credit is still struggling to return to positive growth rates.

In its latest World Economic Outlook, the Washington-based lender of last resort expects the Albanian economy to register one of the region’s highest growth rates in the next six years, but growth will only linger between 3.7 percent in 2017 to about 4 percent in 2023.

The IMF’s role in Albania was downgraded to advisory in early 2017 after the conclusion of a 3-year binding deal supported by a €331 million loan also conditioning the government’s tax policies.
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                    [post_date] => 2018-05-22 15:19:30
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                    [post_content] => TIRANA, May 22 - Albania's natural population growth registered negative growth in the first quarter of this year as the number of deaths slightly exceeded births in a dramatic but warned situation that takes place for the first time in nine decades since Albania established a civil registry in the late 1920s.

The country’s deaths outnumbered births by 285 in the first quarter of this year as the birth rate dropped by an annual 18 percent to hit a record low of 5,670, according to data published by INSTAT, the country’s state-run statistical institute. If the downward trend continues for the remaining three quarters of the year, 2018 would mark the first year on record that Albania’s natural population growth turns negative.

The decline in Albania’s birth rate is a result of cultural changes in the typical Albanian household during the past quarter of a century of the country’s transition to democracy and a market economy, lower marriages and fertility rates and high migration rates which in the past few years transformed into asylum-seeking in wealthy EU member states.

Due to massive migration and a sharp decline in fertility rates, natural population growth has been even more dramatic as it dropped from about 60,000 in the early 1990s to less than 9,000 in 2017.

The high number of asylum seekers in the past four years, the ongoing legal migration and a sharp decline in birth rates have sparked concerns over a rapidly shrinking population with negative impacts for the country’s developing economy of 2.8 million residents, already suffering one of the world’s highest per capita migration with 1.5 million Albanians living and working abroad.

 

Why Albanians massively migrate

Experts says Albanians are mostly leaving the country because of economic reasons, looking to escape poverty in their homes but also to integrate into leading European economies and take advantage of better education, health and social protection infrastructure for their families.

Social affairs expert Kosta Barjaba says it’s youngsters and the poor who mostly migrate.

“Today, the influx of Albanian migrants is composed of economic migrants, family members who migrate for reunification, students and the so-called ‘economic asylum-seekers’ who constitute a masked form of economic migrants,” says Barjaba.

“The poor are more prone to migrate. The poor and the jobless see migration as a solution. The middle class migrates not only as a solution but also as a choice. That is mainly related to pull factors such as ambitions to have a better job, a more decent and quality life and more opportunities for their children in Western host countries,” he adds.

According to Barjaba, Albania's demography is not expected to dramatically change in the next few years as the migration influx moderates and the rate of return for successful migrants increases.

“Nobody can deny that Albanians continue to migrate because they are unhappy with their country, they are unhappy with the government and their living standards. The numbers should worry us because we continue remaining on the natural limits of migratory potential. The most concerning thing is that the migratory influx is twice higher compared to the natural population growth,” says Barjaba.

Meanwhile, Kastriot Sulka, another social affairs expert, says Albania’s migration also takes place because of lack of hope which is reflected on the big number of asylum-seekers with Albanians often competing with migrants escaping war-torn countries.

“The most common thing is that labor forces move because of wage gap and extra advantages they have in certain societies which have social protection, education and health more developed,” says Sulka.

GDP per capita in Albania and other EU aspirant Western Balkan countries is estimated at only a third of the EU average at a time when consumer prices are at only a third below the EU-28 average, according to Eurostat, the EU’s statistical office.

“There is also migration because of the qualification and opportunities certain societies and countries offer to develop or reward individual investment such as the case of doctors and nurses. Their migration has now become a concern for the society due to their high costs incurred during their qualification period and problems they create with shortage of service in certain areas of the country,” adds Sulka.

According to him, Albania’s typical migrants mostly include people aged up to 30 years old who after consuming their efforts in the internal market, try to earn a living for their families abroad, not only by looking for a job but also seeking asylum and quite often ranking on top.

The pension system, which has been reformed in the past few years by gradually increasing retirement age for women is also at risk due to the low number of social security contributors.

“What adds to the concern is the very high levels of migration in the past few years which has made the situation even more tragic as we are dealing with the departure of those who contribute or constitute potential for social security contributions at a time when the number of beneficiaries is increasing due to higher life expectancy,” says Sulka.

 

Sharp decline in birth rates

In 1929, when Albania established its first civil registry, the number of births was over 30,000 while in the 80s the country had over 60,000 births a year. Data shows that in 1990, just before the collapse of the communist regime, the number of births reached to 82,000 and dropped to about 31,000 last year.

Experts says the sharp decline in birth rates and high levels of migration are expected to have multiple consequences to the country’s demography, economy and society in the future decades.

In its latest World Population Prospects, the United Nations Population Division expects Albania's current 2.8 million resident population to drop to below 1 million by 2100 under a pessimistic scenario that more than halves population numbers for regional Western Balkan countries not attractive to migrants.

The World Bank has warned the recent fertility decline in Albania has been dramatic and rapid. “For example, the shift from an average fertility rate of over five children per woman to below the population replacement rate took two centuries in France but only 34 years in Albania,” the World Bank says in its Golden Ageing report.

Once the country with the highest fertility rate under communism, Albania has seen its average number of children per woman drop to 1.78, down from 3 in 1990 just before the transition to a multi-party system and a record 6 in the early 1960s, which has contributed to the population shrink and ageing.

The International Monetary Fund says shrinking populations pose a formidable fiscal challenge, placing public finances of countries under pressure on increased spending on pensions and health, reduce economic growth and make it more difficult to reduce public debt as a share of GDP.

The Albanian economy grew between 1 to 3 percent annually in the past nine years, compared to a pre-crisis decade of 6 percent annually, the growth rate estimated to bring tangible welfare to Albanian households, considering the current stage of the country’s economic development.

However, public debt remains at 70 percent of the GDP, a high level for the country’s stage of development, with high debt servicing curbing much-needed public investment.

An estimated 1.5 million Albanians already live abroad, 1 million of whom in neighboring Italy and Greece. Their contribution to the Albanian economy in terms of remittances and investment has sharply waned in the past decade due to recession in their host countries and because of creating their own families and often taking their parents with them.

Migrant remittances slightly increased in 2017 when they recovered to €636 million, up from €616 million in 2016, but yet about a third below their peak level of €952 million in 2007 just before the onset of the global financial crisis, according to the country’s central bank.

 

Asylum exodus 

More than 146,000 Albanians, about 5 percent of the country’s resident population, have sought international protection in EU member countries in the past five years with their number peaking at 66,000 in 2015 and dropping to 22,000 in 2017.

However, only few thousands, about 5 percent of them, have been granted international protection and a considerable number have come back either voluntarily or after being deported.

Europe’s largest economy, Germany has been the main destination for Albanian asylum-seekers.

With only few applicants managing to get asylum, more and more Albanians have turned to studying German language in the past couple of years, joining a Western Balkan trend of preparing to integrate into the German labor market and escaping high unemployment and low-income jobs in their home countries.

Repatriated asylum-seekers are also among the German language students in Albania’s main cities as they plan to move to Germany legally through employment contracts.

Doctors and nurses are also among those who have left the country, leaving many hospitals with a shortage of experts.

Obvious reasons for Albanian citizens leaving their home country include high unemployment, small income which in some cases is lower than the social benefits as asylum seekers in Germany, lack of trust in state institutions perceived as corrupt and inefficient, real or perceived lack of job perspectives and unrealistic expectations compared to income in Western European countries, primarily Germany, according to a study conducted Tirana-based Cooperation and Development Institute.

Data published by state-run statistical institute, INSTAT, shows some 40,000 Albanians left Albania in 2017 and 25,000 permanently moved to the country, leading to a gap of about 15,000 people.

Prime Minister Edi Rama has described migration as a normal phenomenon also affecting EU member countries such as Poland, Croatia but also southern Italy, which in Albania’s case is reflected on asylum-seeking due to the country not being an EU member yet and not enjoying free flow of workers.

However, some experts have attributed the high level of migration from Albania to the tough rule of law reforms the country has undertaken in the past five years, especially with electricity and tax evasion, often targeting the poorest.

The latest 2011 census showed Albania’s resident population dropped by 8 percent to 2.8 million people compared to a decade earlier due to lower fertility rates and high immigration. Prospects are pessimistic as the population is expected to undergo another decline in the next few decades.
                    [post_title] => Albania’s natural population growth turns negative for the first time in almost a century
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                    [post_date] => 2018-05-21 18:09:14
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                    [post_content] => TIRANA, May 21 – The Albanian government has postponed the implementation of a newly adopted value-based property tax for next year, giving local government units another 10 months to prepare for its collection.

The value based property tax was supposed to enter into force in April 2018, applying a 0.05 percent rate on homes and 0.2 percent on business facilities under a new formula that is set to increase fees for downtown apartment owners almost two-fold especially in major cities, compared to current fixed rates depending on the size and location of the property.

“The 2018 period will be a transitory period that allows local government units to prepare better so that by January 1, 2019 all local government units apply the value-based property tax," Finance Minister Arben Ahmetaj told reporters on Monday.

The finance minister later clarified the transition period will be in place only for those municipalities that are not ready yet to apply the new value added tax.

For apartments built before 1993, the tax rate will be calculated at a 0.05 coefficient but at a 30 percent discount compared to the market value.

When it comes to business owners, the new 0.2 percent property tax rate is not going to make much difference compared to current tariffs.

Albania's 61 municipalities, which are going to collect the new fees either through the state-run water company or the OSHEE electricity distribution, can reduce or increase the rate by 30 percent.

The new tax is expected to considerably increase local and central government revenue, currently at only about 0.2 percent of the GDP almost half of what regional countries do and far from meeting the normal level of 1 percent of the GDP.

Albania’s 61 municipalities collected 4.1 billion lek (€32 mln) in property tax in 2017, about 40 percent of which in the municipality of Tirana which has been collecting the tax along with the tap water bills since March 2016 to increase collection rates, according to a local government finances portal.

The delay in the tax implementation is also to ongoing development of a fiscal cadaster under which every building will have its real surface area and value.

The reform will also involve agricultural land and construction sites, apparently also providing a solution to the long-standing property issue, a key barrier for Albania to attract foreign direct investment.

Albania has an estimated 900,000 residence and business buildings, a majority of which built in the past 25 years of the country’s transition to democracy and market economy. Dozens of thousands of them were illegally built and legalized in the past few years.
                    [post_title] => Value-based property tax postponed for next January 
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                    [post_date] => 2018-05-21 17:24:15
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                    [post_content] => TIRANA, May 21 - A decade after joining the CEFTA regional trade agreement, non-tariff barriers continue to hamper trade exchanges among EU aspirant Western Balkan countries where intra-regional trade has failed to expand and continues to be concentrated on goods with low value added, a European Commission report has shown.

Examining untapped potential in the Western Balkans intra-regional trade, a European Commission discussion paper says burdensome import and export procedures is one of the main reasons behind the relatively low trade among the six Western Balkan countries.

“There are no tariffs and quantitative restrictions on trade in manufactured products between the Western Balkan countries and substantial progress has been made on reducing tariffs on agricultural goods under CEFTA, the Central European Free Trade Agreement. However, as in other regional free trade areas, non-tariff barriers continue to act as an impediment to the free flow of goods across borders,” says the Commission, noting that technical and administrative barriers to trade as well as sanitary and phytosanitary measures are the main non-tariff barriers applied in the region.

However, in the latest Doing Business report, Albania, Serbia and Macedonia rank among the top 25 performers out of 190 global economies in the ‘trading across borders’ indicator measuring time and cost to export.

Poor connectivity within the region is described as a major obstacle to economic development, trade and investment, with experts noting that for some Western Balkan capitals it is actually faster to reach Vienna than another capital in the region.

“The economies in the region share some similarities. All Western Balkan economies are very small and still relatively underdeveloped, with average GDP per capita in purchasing power standard at approximately one third of the EU level. In addition, they have significant domestic and external imbalances. Importantly, the stock and quality of transport infrastructure – a major trade facilitation factor, in general, is relatively poor,” says the report.

The Albania-Kosovo highway, known as the Highway of Nation, which Albania completed in 2010 and Kosovo three years later, is mentioned as an example of new infrastructure with a noticeable impact on both distance and time.

The EU is by far the main trading partner and investor of all Western Balkan countries, accounting for more than two-thirds of total imports and exports as well as foreign direct investment.

After trade with the EU, intra-regional trade comes second in importance, representing a fifth of all exports and a tenth of imports, but overall intra-regional trade has been rather stagnant, both in terms of volume and structure, over the last decade, says the report.

Serbia, the region's largest economy, and Macedonia, the Western Balkan economy with the lowest tax burden, dominate regional exports.

"Intra-regional exports in the Western Balkans are geographically concentrated and most of them originate from Serbia. In 2016, around half of all merchandise intra-regional exports originated from Serbia, while slightly more than a fifth came from the former Yugoslav Republic of Macedonia," shows the report, adding that exports are mainly absorbed by Kosovo and Bosnia and Herzegovina.

Differently from EU-dominated garment and footwear exports, Albania's exports to the region are dominated by base metals, minerals and vegetables which comprised nearly three quarters of its regional exports in 2016 and were close to 70 percent of them a decade ago in 2007.

Albania’s exports of goods and services as a share of the GDP stand at 29 percent, being one of the region's lowest. The low levels of exports indicates the country's poor diversification of exports, three quarters of which rely on low value added ‘garment and footwear,’ ‘minerals, fuels and electricity’ and ‘construction materials and metals,’ exposing the country’s economy to industry-specific shocks such as the mid-2014 slump in commodity prices significantly reducing the country’s key oil and mineral exports.

 

Regional economic area

The European Commission report comes at a time a time when Western Balkan countries prepare to adopt measures for an EU-backed regional economic area, a test before their apparent eventual European Union integration which the EU has indicated could see some candidate countries join by 2025.

Back in mid-2017, Western Balkan leaders agreed to develop an EU-backed regional economic area of 20 million consumers where goods, services, investments and skilled workers can move without obstacles.

The regional economic area initiative foresees implementation of actions at all levels in the period between 2017 and 2020 with some actions extending until 2023.

“Fostering regional economic integration is seen as supplementing these countries' efforts to join the EU, building upon previous initiatives, in particular the establishment of CEFTA,” says the European Commission report.

An earlier report by UNCTAD, the United Nations body responsible for international, has shown regional EU aspirant Western Balkans countries need to undertake business climate reforms and boost cooperation to attract increasing levels of foreign investment.

FDI in the Western Balkans, largely perceived as lacking rule of law and where corruption remains a key barrier to attract big investors, accounted for only about 0.27 percent of total global FDI in 2016, and declined by an annual 5 percent, at a faster pace compared to global FDI, unveiling the region's lack of competitiveness.

Albania has a trade gap with all regional countries except from neighbouring ethnic-Albanian Kosovo.

Albania’s current cooperation with CEFTA member countries that includes six Western Balkan member countries and Moldova is currently poor and already hurt by frequent trade disputes and barriers.

Albania’s exports to CEFTA countries account for only about 14 percent of the total while imports for only 7 percent, compared to more than three-quarters of exports and two thirds of imports to and from EU member countries, according to Albania’s institute of statistics.

In its latest ‘Spring’ European economic forecast report, the EU’s executive arm, expects the Albanian economy to slow down to 3.6 percent in 2018, down from a nine-year post crisis high of 3.8 percent and recover to 3.9 percent in 2019 to register the highest growth rates among regional EU candidates.

The slowdown is related to this year's completion of TAP and Devoll hydropower, the two major energy-related projects that drove Albania's FDI and economic recovery for the past four years.
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                    [post_date] => 2018-05-21 12:58:57
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                    [post_content] => TIRANA, May 21 – Albania’s domestic oil production hit a 6-year low in 2017 despite international oil prices considerably recovering following the mid-2014 slump, but yet remaining at about half of their peak 2011-13 levels in a situation that has slowed down new drilling and investment.

Data published by state-run Albpetrol oil company shows Albania produced 956,000 metric tons of crude oil in 2017, down about 10 percent compared to 2016 and about 30 percent less compared to the peak 2014 production of 1.36 million metric tons just before oil prices embarked on a downward trend.

Canada-based Bankers Petroleum, the country’s largest oil producer which in mid-2016 was fully acquired by a Chinese consortium, accounted for the overwhelming majority of 90 percent of total domestic production.

Earlier this year, the company won an arbitration battle with the Albanian government which was ordered to pay back the country's largest producer $57 million (€48 mln) over a tax dispute dating back to 2011.

The company is now exporting most of its crude oil production after the late 2017 suspension of operations of a local oil refiner that went bankrupt leaving more than 1,000 oil workers jobless. Last year, the Chinese-run largest oil producer in the country sold up to two-thirds of its production to the local refiner.

Bankers Petroleum operates the Patos-Marinza, one of Europe’s largest onshore heavy oilfields under a 25-year concession deal with the Albanian government which expires in 2029.

The company, which in Sept. 2016 was acquired China’s Geo Jade for  C$575 million (€392 mln) from Canadian investors, has considerably curbed oil production and delayed new drilling following the mid-2014 slump in international oil prices.

Bankers Petroleum posted losses of about 5.7 billion lek (€45 million) in 2016 as oil prices hit a 12-year low of an average of $43.55 a barrel, a situation that paralyzed new drilling, according to financial reports submitted with Albania's National Business Center.

Meanwhile, state-run Albpetrol oil company which currently runs only 5 percent of oil wells, almost doubled its production to 93,000 metric tons in 2017, up from 51,000 metric tons in 2016. The increased production came as three oil fields were taken back under state control following failed deals with private concessionaires.

Last March, the energy ministry said it was offering the Gorisht-Kocul, the Cakran-Mollaj and the Amonica oilfields, all located in the region of Vlora, southern Albania, but the call apparently received no interest from potential investors.

Domestic refining also registered a strong recovery last year.

The local refiner produced 156,000 metric tons of fuel from locally extracted crude oil in the first eleven months of 2017 before it went bankrupt in December 2017.

The domestic refining industry has recently been partially reactivated by a Switzerland-based company following a four-month halt that led to a surge in oil imports.

Due to the poor quality of domestically produced oil that needs heavy refining, Bankers Petroleum usually sells crude oil at about a third below Brent prices.

 

Prospects improve 

Albania's oil industry could receive a major boost if prices pick up and oil giant Shell, currently involved in some key promising exploration projects, decides to engage in production.

UK-based BMI Research, a unit of Fitch, expects Albania's crude oil production to drop from an estimated 19,000 barrels of oil per day in 2017 to 17,100 by 2021 in a forecast that does not take into consideration results of new drilling by Shell oil giant in southern Albania and whether it will engage in production.

Crude oil Brent prices have currently recovered to about $79 a barrel, up from a 12-year low of $30 a barrel in early 2016, but yet stand almost a third below the peak level of more than $110 in mid-2014 just before the slump.

Domestic oil production peaked in 2014 just before the mid-year slump in international prices when the Bankers Petroleum-led domestic production hit a 35-year high of 1.36 million metric tons.

Albania’s highest oil production dates back to 1974 when the then-communist country produced 2.25 million metric tons equal to about 38,408 barrels of oil per day in an industry that involved 34 state-run enterprises and employed about 25,000 people.

Albania oil exports, which make up about a fifth country's poorly diversified exports, are low-value added as oil is mostly exported as crude.

The oil industry produces Albania’s second largest exports and employs more than 3,000 people, but what the Albanian government gets from exports is only a 10 percent royalty tax as no company currently pays the controversial 50 percent tax rate, which under current contracts, concessionaires start paying once they meet investment costs.

In its new contract with British-Dutch multinational Shell the government says Albania will be able to earn a portion from the first oil production in addition to the mining royalty when the oil giant engages in production.

The new production sharing contract that Albania signed with Shell earlier this year extends the British-Dutch multinational’s operations in the country, currently at an exploration stage, to three blocks.

Shell’s oil exploration in Block 4 will be carried out in three stages over the next seven years with investment of $42.5 million. In case of oil discovery, the development/production contract will be for 25 years with an option of renewal, says the energy ministry.

The oil giant has included Albania on its map of more than a century of key discoveries thanks to its early 2013 Shpirag 2 well discovery in excess of 800 million of oil and flowing at rates of 800 to 1,300 barrels of oil per day.

The oil and mining industry was the fourth largest FDI recipient at the end of 2017, with the investment stock at about €875 million, accounting for 13 percent of the total FDI stock of €6.5 billion, according to Albania’s central bank.

 
                    [post_title] => Albania’s oil production hits 6-year low as prices slowly recover from mid-2014 slump
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                    [post_date] => 2018-05-17 14:51:41
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                    [post_content] => TIRANA, May 17 – With two-thirds of Albania’s exports destined for Eurozone countries, the country’s exporters are suffering their first blow from the considerable strengthening of Albania’s national currency against Europe’s single currency during the first five months of this year.

The garment and footwear industry producing the country’s top exports is the hardest hit industry due to the low value-added exports it produces as the raw material is overwhelming imported from Eurozone countries, mainly Italy, and labour costs and taxes are incurred in the national currency, lek.

"Garment and footwear" products, accounting for 40 percent of Albania's poorly diversified exports, grew by a mere 5 percent year-on-year in April 2018 following double-digit growth rates in the previous three months as the Euro traded at a 10-year low of an average of 129.3 lek, down from 135.4 lek in April 2017, a depreciation of 4.5 percentage points, according to INSTAT and Bank of Albania data.

Their growth for the first four months of this year also slowed down to 10 percent, down from 11.6 percent in the first quarter of the year as the national currency continued to gain ground against the Euro.

Europe’s single currency was more stable this week trading at an average of 127.3 lek after hitting a 10-year low of 126.86 on May 9 but has depreciated by about 5 percent compared to the mid-January peak level of about 134 lek for this year and is about 9 percent lower compared to the mid-2015 as the euro’s five-year reign of about 140 lek came to an end.

Garment and footwear producers, relying on cheap labour costs, say they are incurring huge losses and some of them been forced to cut staff to handle the situation.

However, Finance Minister Arben Ahmetaj has downplayed risks, saying the maximum losses garment and footwear producers could incur even if the national currency strengthens by 20 percent is about 2 to 3 percent more in costs as the industry overwhelming imports from Eurozone countries and trade in euro and the added value they produce is only 20 percent.

Garment and footwear companies in Albania have been facing rising difficulty in finding new workers in the past few years amid hesitation and refusal of potential employees to work for low wages, rising competition by call centers offering much better benefits and a new migration wave.

The sector is mostly involved in cut-make-trim production and overwhelmingly imports raw materials, designs and patterns but there are also a few emerging Made in Albania brand that have upgraded to full cycle production.

Albanian exporters have warned the considerable strengthening of Albania’s national currency, lek, against Europe’s single currency in the first four months of this year will lead to losses of at least €100 million for the country’s economy for 2018 alone.

However, the country's central bank says it cannot intervene in the country's free floating exchange rate regime and that its adopted de-euroisation measures discouraging massive savings and borrowing in Euro have not had an impact yet as they become effecting starting next June.

The central bank and the Albanian government say the strengthening of lek is a signal of Albania's recovering economy and increased Euro inflows from major FDI projects and tourism, but the opposition and some experts doubt the main reason behind this situation is euro inflows from drug cultivation and trafficking that are allegedly being laundered in construction projects.

The newly adopted de-euroisation package makes it more expensive for commercial banks to provide Euro-denominated loans and accept deposits in Europe’s single currency, by their increasing compulsory reserve requirements and lowering requirements for credit and savings in the national currency.

However, Albania's exports seem on track to register double digit growth rates for this year, fuelled by 'construction material and metals" as well as recovering crude oil exports and the resumption of electricity exports following heavy rainfall since late 2017 improving hydro-dependent domestic electricity generation.

Albania’s exports grew by about grew by 16.8 percent to about 101 billion lek (€780 million) in January-April 2018, but met only about half of the country's imports which grew by 8.4 percent to produce a slightly higher trade gap compared to the first four months of last year.

Italy, Germany, Greece and China were Albania's top trading partners for the first four months of this year with traditional top trading partner Italy accounting for about 36 percent of Albania's total trade exchanges.

Albania’s exports grew by 12 percent in 2017 following modest growth of 0.1 percent in 2016 and a 5 percent decline in 2015 triggered by a sharp cut in international oil and mineral prices.
                    [post_title] => Exports’ growth slows down following ongoing national currency’s strengthening 
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                    [post_content] => [caption id="attachment_137142" align="alignright" width="300"]Finance Minister Arben Ahmetaj Finance Minister Arben Ahmetaj[/caption]

TIRANA, May 16 – The Albanian government has unveiled a package of tax incentives for 2019 when Albania will be holding its upcoming local elections and the ruling Socialists eye to preserve the ruling of the country’s big local government units.

Finance Minister Arben Ahmetaj says Albanian businesses will benefit lower corporate income tax as well lower value added tax rates on agritourism and exemptions from 20 percent VAT on imports of equipment to build solar power plants.

The legal changes are expected to be approved next June but enter into force before next January, six months ahead of Albania’s next local elections in 61 municipalities, the largest 36 of which are run by Socialist Party mayors. The remaining municipalities are run by the main opposition Democratic Party and their new allies, the Socialist Movement for Integration, who served as kingmakers from 2009 to 2017 ruling both with the Democrats and the Socialists.

Finance minister Arben Ahmetaj says some 10,000 businesses, currently paying a 15 percent corporate income tax will be taxed by 5 percent on their profits following the increase in the annual turnover threshold.

Small businesses with an annual turnover of up to 5 million lek (€39,000) are currently stripped of the profit tax. Businesses will an annual turnover between 5 million lek to 8 million lek (€62,000) pay a fixed 5 percent profit tax while companies with a higher turnover pay a 15 percent corporate income tax.

The new government plan is to apply a 5 percent corporate income tax on businesses with an annual turnover of between 8 million lek to 14 million lek (€110,000), something which minister Ahmetaj says would benefit half of the 21,000 big businesses currently paying a 15 percent corporate income tax, one of the highest among Western Balkan countries.

The initiative is aimed at reducing tax evasion among businesses who often report lower than real turnover to pay less in taxes, Prime Minister Edi Rama has earlier said.

Albania has some 160,000 businesses, 90 percent of which small family-run ones employing up to four people.

The new incentive which favors medium-sized companies currently paying a 15 percent corporate income rate, comes after the tax burden on some 10,000 small businesses nationwide has sharply increased after their inclusion in the VAT system last April.

Legal changes reducing the annual turnover threshold on VAT inclusion to 2 million lek (about €15,000), down from a previous 5 million lek (€39,000) were met with nationwide protests last April with some 10,000 affected traders voicing concerns over massive bankruptcies at a time when small businesses are already facing tough times amid tighter competition by supermarket chains and shopping centers already in the 20 percent VAT system.

The high tax burden making Albania less competitive compared to other regional countries applying 10 percent flat tax rates is one of the top concerns for foreign and local businesses operating in the country.

Since 2014, the corporate income tax and the withholding tax on dividends, rents and capital gains have increased by 5 percent to 15 percent, making the tax burden in the country one of the region’s highest.

Other tax incentives that the Albanian government will offer for 2019 include the exemption of imported machinery and equipment intended for solar energy production from the 20 percent VAT in a bid to diversify domestic electricity generation.

Albania’s domestic electricity production is currently wholly hydro-dependent, making it vulnerable to adverse weather conditions such as last year’s prolonged drought that cost the country €200 million in electricity imports.

Agricultural cooperatives, currently in their early stages due to massive fragmentation of agricultural land and still notorious from the communist regime, will also be offered a 5 percent corporate income tax.

Currently, there are only a few dozen agricultural cooperatives operating in Albania, a small number for a sector that holds huge potential by employing about half of the country's population and generating a fifth of the GDP.

Last April, agricultural cooperatives were stripped of 20 percent value added tax in a move that is expected to give a boost to a key sector of Albania’s economy suffering high levels of tax evasion, extreme farm land fragmentation and poor productivity.

The Konispol area, in southernmost Albania just off the UNESCO World Heritage site of Butrint, is a perfect example of successful farmers’ cooperatives in citrus cultivation.

The emerging agritourism sector is also set to benefit from several tax incentives, including a 5 percent corporate income tax, a reduced 6 percent VAT and exemption from infrastructure tax on investment.

Agro-tourism is in its initial steps in Albania with several restaurants, wineries, bee and fruit farms offering tourists authentic local products.

The government has also earlier tax incentives for luxury hotels and resorts in a bid to build infrastructure for elite tourism as tourism gradually becomes a key driver of the economy.

The finance minister says the government will continue to apply unsolicited bids on public private partnerships until mid-2019 despite IMF warnings on the risk of the government’s controversial €1 billion PPP to the public debt reduction agenda and bonuses awarded to companies for unsolicited proposals in road infrastructure and public service tenders.

Ahmetaj says the strengthening of Albania’s national currency lek, which has hit a ten-year high of 127 lek against Europe’s single is a signal of Albania’s economic recovery, but the opposition and some economy experts link the phenomenon which is negatively affecting Albania’s exporters to the euro inflows from the massive 2015-2016 nationwide cannabis cultivation and ongoing drug trafficking.

The ruling Socialist Party of Prime Minister Edi Rama holds a comfortable majority of 74 votes in the 140-seat Parliament, allowing the Socialists to rule on their own in the second consecutive term after a coalition government in 2013-2017, but lack the required three-fifths of votes to trigger reforms in the country.

Albania is hoping to launch accession talks next June pending a decision by EU leaders at the European Council after a positive recommendation by the European Commission, the EU’s executive arm, but some big powers remain skeptical and the final say is uncertain.
                    [post_title] => Ruling Socialists offer tax incentives ahead of upcoming 2019 local elections
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            [post_date] => 2018-05-24 16:42:18
            [post_date_gmt] => 2018-05-24 14:42:18
            [post_content] => TIRANA, May 24 - Gambling businesses are paying less in taxes and a late 2013 nationwide campaign to curb widespread informality in the sector seems to have now been forgotten although having a positive effect for 2014.

Gambling companies ranging from electronic casinos to thousands of sports betting shops paid about 4.52 billion lek (€35.5 mln) in taxes in 2016, down 16 percent or €6.5 mln compared to 2014 when the government collected a record 5.35 billion lek (€42 million) triggered by a nationwide late 2013 campaign dubbed "The end of madness," Top Channel TV reports citing data obtained by the tax administration.

The lower collection rate is also related to huge debts gambling businesses owe to the tax administration.

Despite booming income and high profit rates, two sports betting companies and Albania's sole casino were among the top debtor companies owing the tax administration a total of 1.5 billion lek (about €12 mln) at the end of 2016, according to data by the Supreme State Audit.

Albanians are reported to have spent about 15.2 billion lek (€120 mln) in electronic casinos and booming sports betting shops in 2016, up 15 percent compared to 2015, according to data obtained by Monitor magazine. The amount is equal to about 1 percent of the country’s GDP and is considered too high for Albania where similarly to other regional countries, GDP per capita and consumption rates are at only about a third of the EU average.

In a report on inspections carried out in the first half of 2017, the Supreme State Audit said it identified about 50 billion lek (€375 million) in income that state authorities failed to collect from 2014 to 2016. The revenue miss is related to the Gambling Supervisory Authority’s failure to impose and collect fines following seizure of games of chance equipment, often operated informally or not meeting technical requirements.

In late 2016, the ruling Socialist Party-majority approved a two-year extension to a law disciplining gambling in downtown areas, citing concerns over gambling businesses not being ready to move to tourist attractions, the possible spread of illegal gambling and the state budget losing millions of euros in taxes, in a move which came following apparent successful lobbying by the lucrative gambling industry. The law, initially scheduled to come into force in January 2017, will now be implemented starting 2019 unless a new extension takes place.

Albanian authorities have selected an Austrian-Polish-Albanian concessionaire to set up, operate and maintain an online central monitoring system on Albania’s gambling industry for the next 30 years.

The government says the concession is aimed at preventing tax evasion and money laundering in the industry which employs about 1,800 people and generates an annual $125 million in turnover.
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