One in four self-employed businesses fail

Tirana Times
By Tirana Times April 12, 2019 15:46

One in four self-employed businesses fail

Story Highlights

  • Due to the reduced VAT threshold that the government implemented on April 2018, together with the forceful campaign of formalization and tax collection, have pushed a drastic decline in self-employed person contributing to social security. They are either working on the black, or have gone bankrupt.

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TIRANA, Apr. 9- The Social Insurance Institute (SII) has released some data for 2018 regarding the social security contributions from self-employed workers, which reflected the ongoing crisis the small business in Albania is suffering. According SII’s data, from 110,500 persons in 2017 that would contribute to social security in the “self-employed” category, the number fell to 86,600 persons. The “self-employed” category implies persons with a small, private business.

In 2016 the number of self-employed contributors was 120 thousand persons. This number could also reflect the formalization which happened during the forefull campaign from the government for tax acquisition in the last months of 2015. According to SII, during this period of formalization the number increased from 105 thousand to 120 thousand persons, but within two years the level has dropped again. However, even though the self-employed contributors number has declined, the number of social security payers increased by 27 thousand persons during 2018, reaching an overall of 721 thousand employed persons paying the security insurance.

The number of self-employed persons in agriculture seems to have remained at the same level of 59 thousand persons during 2018, just like in the previous year. This indicator for farmers has drastically fallen since 2013, when the SII would count 205 thousand contributors. This decline might perhaps reflect the campaigns of contributions remissions in rural areas undertaken by the former DP-SMI government and the SP-SMI government. (DP- Democratic Party; SP- Socialist Party; SMI- Socialist Movement of Integration). During those years, governments allowed the rural population a discount on previous years contributions by paying up to 80 percent of their worth. Since SII measures the average number of contributors as a simple fractionation of the annual number of payments by the number of months, the statistics do not reflect the contributing “people” but the contributing “months.”

The decline in the number of self-employed in Albania might reflect the wider decline in small business sales during 2017. The Albanian Institute of Statistics (INSTAT) reported on November 2018 that the turnover of small enterprises with up to four workers fell by 15 percent over the past year, whereas that with five up to nine workers fell by about 10 percent. Small enterprises of an individual character, which in statistics are reported as enterprises with one to four employees, are responsible for one third of all employees who live with only 12 percent of sales. Over the past year, there were nearly 95 thousand such enterprises in Albania. Though for statistical purposes these enterprises are classified in the group of one to four employees, in fact, the INSTAT figures suggest that most of them have only one self-employed. More concretely, the 95 thousand small enterprises have altogether 150 thousand employees with an average of 1.5 employees per enterprise.

In April 2018, against the best councils of local and foreign experts, the Albanian government decided to reduce the value added tax threshold from 5 million to 2 million lek, which forced thousands of micro businesses to enter a relatively complicated tax. As lately reported this threshold was also lowered for farmers reimbursement by companies which buy ram materials from them, which pushed farmers to protest. The first to suffer would be the milk industry.

Tirana Times
By Tirana Times April 12, 2019 15:46