PM Rama threatens punitive measures on informal economy

Tirana Times
By Tirana Times July 18, 2019 12:56

PM Rama threatens punitive measures on informal economy

Story Highlights

  • As a new director for the Tax Agency was appointed, the Prime Minister said another action to tackle informal economy will be taken, and all subjects which do not abide by the business taxation laws will be fined.

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TIRANA, July 15- Albanian Prime Minister Edi Rama said on Monday that “Those who do not reach the indicators can not be part of this administration, tax or labor inspectorate.” The declaration came during the presentation of newly appointed tax director Delina Ibrahimi. “How can it be accepted today that we talk about 15 thousand non-reporting fiscal registers in active businesses, from 112 thousand in total,” Rama questioned.

The Prime Minister created a number of punitive measures in 2015 for businesses that operated informally, which led some small businesses bankrupt. After the introduction of the new director, Rama wrote on Facebook that “For nearly a year we have been trying to raise awareness, information, and business consulting in relation to tax obligations, minimizing punitive access. Now enough with the illegal competition and with the frustration at the expense of the consumer!

IT IS TIME THAT WHO DOES NOT COUPON, DOES NOT REGISTER AND INVOICES, TO BE LEGALLY BLOCKED.”

From October to December 2015, the Ministry of Finance launched a strict anti-informal action which created apprehension among businesses, especially small enterprises. This action was accompanied by a significant increase in punitive measures, from multiple fines to prison threats to offenders. Some of the measures included the ten-fold increase at 500 thousand lek (4 thousand euros) of fines for employees non-declaration in small business; 500 thousand lek fine and penal charges for non-declaration of real wages; 500 thousand lek fine for non-declaration of real address; confiscation of up to 50 percent of turnover if the business has obligations; a fine of 10 million lek (82 thousand euros) for wholesale merchants who trade the goods without tax invoices;  500 thousand lek fines for the small business for not issuing a tax coupon.

Then Finance Minister Shkëlqim Cani said they would recover 300 million euros in the first months of the action. However, a year later the government was forced to withdraw quickly from the increased punitive measures that were overturned by the Court as unconstitutional and disproportionate to the damage. Instead of 300 million euros revenues, the country’s fiscal performance deteriorated more during the year, with growth rates of budget revenues falling to 3.7 percent from more than 14 percent in 2014. Revenues in 2015 were 26.4 percent of the GPD, almost unchanged from the previous year. 

The business climate deteriorated and the associations’ indexes hit minimum historical levels. The businesses themselves were not against lifting informality, they actually supported it. But they opposed the aggressive forms with which the government plan acted, and especially the focus on small business and strict punitive measures, up to threats of imprisonment. Because the action was conceived as blackmailing to imprisonment, mainly to street-market and small businesses for not issuing a tax coupon, at a time when the economy was suffering from the consequences of the crisis and the poor consumption, thousands of businesses went bankrupt. 

Following the formalization of 37 thousand businesses at the National Registration Center, 90 thousand other businesses went into passive status, while tax debt increased by 100 million euros in 2015 alone, the highest annual rate since the tax agency started to archive the debts businesses owed it. With the newly appointed finance minister Arben Ahmetaj at the beginning of 2016, the institutions became more cooperative in dealing with businesses, the changes in the law on tax procedures were facilitating, and a new approach on informing over punishing was adopted. Revenues rose to 27.6 percent of GDP in 2016, to 27.7 percent in 2017, and fell slightly to 27.3 percent in 2018. The European Commission in its latest report on Albania stressed that fiscal evasion remains too high, especially in terms of VAT and social security, and that the country had room in increasing revenues without the need to increase taxes.

Tirana Times
By Tirana Times July 18, 2019 12:56